SPY, the trading symbol of the SPDR S&P 500 ETF Trust, is one of the easily accessible options for beginner investors to replicate the performance of the S&P 500 index.
SPY was the first Exchange-traded fund (ETF) launched in the United States in 1993.
Nowadays, SPY has grown its assets to over $420 billion, helping spread its fixed expenses over a wide asset base. As a result, SPY remains a low-cost option for investors of all sizes, from individuals just getting started in investing to institutions with decades of market experience to track the S&P 500.
In this article, we’ll share tips for choosing a stock broker to buy the SPY ETF, provide a step-by-step guide to help you make your first purchase, highlight data provided by the ETF sponsor State Street, delve deeper into the reporting structure of SPY, and more!
How to buy the SPY ETF (Step-by-step guide)
1. Choose a good stock broker
Since SPY is among the largest ETFs tracking the S&P 500 index, you can choose from many brokers to help you purchase. That said, consider the terms offered by each broker and ensure the broker you pick works with residents of your country. Below, we highlight four brokers which offer SPY:
|Broker||Stock commission, US||Minimum Deposit||Available countries|
|eToro||$0||$10 (varies for different countries)||Worldwide – exceptions apply.|
|Interactive Brokers||Free for US investors. Up to $0.0035 per share with a minimum of $0.35 for international investors||$0||Worldwide – exceptions apply.|
|Webull||$0||$0||US, Hong Kong, China, Singapore, Japan, UK, Australia|
2. Open and fund your account
Once you have weighed the pros and cons of each broker, you are all set to open an account. The process usually takes a few days as the broker verifies your identity. After the process is finalised, you must deposit money into your account.
3. Place a “Buy Order”
If you have found an online broker that suits your needs, managed to open an investment account, and made the initial deposit, you are all set to buy your ETF. All you have to do is find the ETF within your chosen broker and place a buy order. For this example, we will use eToro:
a) Search for SPDR S&P 500 (or through the ticker “SPY”):
b) Click “Trade”:
c) Choose the order details. Now, it’s time to choose how to invest:
- Amount: You choose the amount you want to invest in SPY instead of the number of shares. In this way, your investments may be fully or partially in fractional shares1.
- Units: As opposed to “Amount,” here you define the number of shares you want to purchase (note: you can buy using either “Amount” or “Units,” up to you!)
- Leverage: You can choose the level of leverage. “X1” means no leverage, while “X5” means both losses and profits are multiplied by 5. That’s why you see “CFD Trade.”
- Stop Loss: Define the maximum you are willing to lose before closing your position automatically;
- Take profit: Define the profit amount that makes you close your position automatically (if reached).
Only the “Amount” (or “Units”) and “Leverage” are mandatory fields.
e) Place the order: Finally, click “Open Trade,” a new window will show up where it says “order filled,” your exposure, and lets you share your trade with others.
SPY, or the SPDR S&P 500 ETF Trust, is an ETF that tracks one of the main US stock indices, the S&P 500 – the second-oldest US index. The S&P 500 is a capitalization-weighted index, meaning it gives a weighting to each company dependent on its market capitalisation.
Since S&P 500 index weights and composition change constantly as prices move and new companies are added or deleted (the S&P 500 is normally rebalanced four times a year), you can find detailed information on SPY’s holdings on its dedicated website, available here.
The good thing about the SPY is that it is an excellent, low-cost (expense ratio of 0.0945%) investment vehicle for beginner and entry-level investors, as all changes needed to track the performance of the S&P 500 are automatically carried out by State Street, which manages the ETF. You only need to allocate capital to the ETF and (hopefully) watch it grow. SPY also pays dividends quarterly.
State Street’s website keeps track of some key statistics of SPY and its S&P 500 benchmark:
The two key ratios reported above are:
- Price/Earnings Ratio, or P/E. A measure of the company’s profits relative to its market capitalisation.
- Price/Book Ratio, or P/B. A measure of the company’s accounting value relative to its market capitalisation.
A good website to track where the current P/E and P/B ratios of the S&P 500 stand relative to historical norms is multpl.com.
SPY also has three distinct varieties, focused on high dividends (the top 80 companies with the highest dividend yield), value (companies priced attractively on accounting measures), and growth (companies expected to achieve better long-term results):
- SPDR Portfolio S&P 500 High Dividend ETF (ticker SPYD) tracks the 80 S&P 500 components with the highest dividend yield (last dividend paid on an annual basis relative to the share price).
- SPDR Portfolio S&P 500 Growth ETF (ticker SPYG) tracks 233 growth companies in the S&P 500. The ETF distributes dividends, and the expense ratio stands at 0.04%.
- SPDR Portfolio S&P 500 Value ETF (ticker SPYV) tracks 403 growth companies in the S&P 500. The ETF distributes dividends, and the expense ratio stands at 0.04%.
SPY’s Financials and Performance
Once you have purchased SPY ETF shares, keeping track of how SPY is doing relative to other ETFs is a good idea. Doing so will give you greater insight into whether to add to your position, hold it, or sell it to pursue better opportunities elsewhere.
Apart from State Street’s dedicated website (available here), there are specialised platforms to help you understand how SPY is doing from a financial perspective. One platform you can use is Koyfin – you can access ETF Holdings, Sector and Industry breakdowns, Dividend history, and more! Get a 20% discount on Koyfin.
For example, Koyfin allows you to quickly get a handle on SPY’s holdings and industry breakdown:
While such platforms cannot substitute your research 100% of the time, they can be a very useful tool in the research process, saving you time and providing new investment ideas.
Who is State Street?
State Street Global Advisors is among the top 10 asset managers in the world, with $3.8 trillion in assets under management. You can read the company’s complete history here. Some key facts about State Street are:
- State Street was founded in 1978.
- The SPY was launched in 1993 and is the world’s oldest ETF.
- State Street has over 2,100 institutional clients.
- It serves +30 million individual clients in +55 countries.
- It has 10 investment centres.
Hence, it is fair to say State Street is one of the safest options when choosing an ETF provider.
1Fractional shares allow you to own only part of a stock or ETF, without paying the full price; this is useful for ETFs and stocks with a high absolute price, or when you want to diversify your positions. In our example with SPY, the price per share is around $450 but you can invest as little as $10 to get exposure to the SPY ETF.