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If you’re looking for just one stock to own, it’s hard to beat SPY stocks or the SPDR S&P 500 Trust (SPY). Just one trade immediately exposes you to the entire market and S&P 500 at a very low cost. But should you sell it if the market falls?




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Want to own Microsoft stock (MSFT)? And Apple stock (AAPL)? Also Alphabet (Google)? All the top technology stocks are in it. And what about the top consumer brands like disney (dis), walmart (WMT) and now Tesla (TSLA)? Yes, they are also in the SPY. When you buy SPY stock, you essentially own all the most popular stocks in the Standard & Poor’s 500 right away. Just like that. It doesn’t matter who wins, you win.

What is this one share that owns everything?

What is SPY Stocks?

SPY is an exchange-traded fund that owns all the stocks in the Standard & Poor’s 500 index. The S&P 500 is arguably the most important market measure used by investors and traders around the world, as it is the benchmark for trillions of dollars in investments.

Founded in 1926, the S&P 500 tracks the rise and fall of the largest 500 stocks traded on U.S. exchanges. And the S&P 500 is widely viewed by most investors as the definitive measure of the US stock market because of its superiority over rivals.

What are the top 10 positions in SPY?

Since SPY stocks own all the stocks in the S&P 500, the holdings are an open book. And SPY gives more weight to stocks with higher market values, so you can know the top positions at any time.

It is important to note that SPY weights stocks based on the value of the stocks available to trade. This means that it is dominated by the very largest companies. Only the 15 most valuable stocks in SPY stock account for about a third of its value. And now two companies claim more than 5% of SPY shares.

Company Symbol Market Value ($Billions) Weighting in SPY
Apple (AAPL) $2,398 6.9%
Microsoft (MSFT) $1,802 5.4%
Alphabet (GOOGL) $1,274 3.4%
Amazon.nl (AMZN) $968 2.5%
Berkshire Hathaway (BRKA) $677 1.7%
Tesla (TSLA) $578 1.5%
UnitedHealth (UNH) $481 1.5%
Exxon Mobil (XOM) $466 1.4%
Johnson & Johnson (JNJ) $457 1.4%
Nvidia (NVDA) $390 1.2%
Source: State Street as of November 18, 2022

Why is the S&P 500 better than the Dow Jones?

The Dow Jones Industrial Average is often mentioned in market chatter. But the S&P 500 is considered the true and accurate measure of US stocks. Peculiarities in how the Dow Jones is calculated limit its appeal as a true gauge of stocks. And the S&P 500, for example, is a better benchmark for the market because it:

  • Is wider: The S&P 500 has 500 stocks versus the 30 Dow Jones stocks.
  • Is more fully representative of ‘the market’. The S&P 500 gives more weight to companies with the most value traded in the market. This is perhaps a better method than the Dow’s. The Dow weights stocks based on their prices per share. This doesn’t make sense since UnitedHealth (UNH) should not gain several times more influence than Walmart (WMT) simply because it trades for more than $495 per share and Walmart only $125. The S&P 500 weighs them about the same as they are both valued at about $400 billion.
  • Is more rule based. The S&P 500 relies less heavily on human intervention. Changes are being made to both the Dow and S&P 500 as stocks are subscribed and deregistered. And with the S&P 500 and the Dow, people are involved in the selection process. But since the S&P 500 owns nearly all of the major US stocks, there’s less judgment about what goes in and what comes out.

What is an ETF?

SPY is the most popular of nearly 2,000 ETFs with more than $3 trillion in investor assets, says The Investment Company Institute. More than $372 billion is invested in SPY alone.

And ETFs, created more than 25 years ago, are now among the fastest growing investment vehicles in the world. Like mutual funds, ETFs are investments that hold a bucket full of other investments.

And ETFs can own everything from individual stocks, such as SPY stocks, to bonds, commodities, and currencies. Almost all ETFs hold the investments dictated by an index. SPY stocks own the stocks in the S&P 500, the most popular index. But other ETFs own stocks in other indexes, such as small stocks and medium stocks. You can also buy ETFs that only hold growth stocks or value stocks called value stocks. Some ETFs only buy stocks in specific sector indices, such as information technology or utilities.

And there are also more exotic ETFs. Some “inverse ETFs” rise in value when the market falls. And some own raw materials such as gold or silver.

What is an ETF?
What is an ETF? ETFs can include stocks, bonds, commodities and currencies. They can be bought and sold like any stock.

What are the top sectors in SPY?

Another benefit of SPY stocks is that it spreads your investment dollars across all 11 sectors. In just one trade, you own tech stocks, consumer stocks, utilities, and everything else. Again, SPY stocks give greater weight to sectors with the most valuable stocks.

And it’s not surprising that technology dominates SPY stocks, as mega tech stocks occupy most of the top positions. Tech stocks account for more than a quarter of SPY stocks, followed by healthcare at just 13%.

Some may worry that SPY stocks are filling up with winning sectors. But remember that sector weights shift when another sector starts to outperform.

Sector SPY % Weighting
Information Technology 26.5%
healthcare 15.0%
Finance 11.6%
Consumer Discretionary 10.4%
Industrialists 8.5%
Communication Services 7.4%
Consumer Goods 6.9%
Energy 5.4%
Utilities 2.9%
Property 2.6%
Materials 2.6%
Source: State Street as of November 18, 2022

Can you buy just one sector of SPY stocks?

SPY stocks are designed to expose you to all 11 sectors. But you may want to own only a few of the sectors. You may also want to increase your exposure to specific sectors, such as technology. And there are S&P 500 ETFs that only track one sector.

Why is SPY stock important?

SPY Stocks is the oldest and largest ETF, largely because it was the first to track the S&P 500. When you buy SPY stock, you own all of the stock in the S&P 500. This is an attractive offer. Investors own more than $340 billion in SPY shares, says the ETF sponsor, State Street. And nearly $18 billion in stocks are traded daily, a testament to the huge demand for the stock.

What other options are there? How much are they?

SPY is the largest ETF tracking the S&P 500 Index, but it faces stiff competition. State Street Global Advisors sponsors SPY stocks, but not the underlying S&P 500 index. The S&P 500 is owned by S&P Dow Jones Indices, a company that licenses the use of the index. And that means anyone is open to offering competitive S&P 500 ETFs, if they pay the fee. There are many companies that offer S&P 500 ETFs.

So pay attention to size and costs with S&P 500 ETFs. You don’t want to pay too much for what should be one of your lowest cost and core holdings. SPY shares have a very low fee, just 0.095% per annum. That means if you invest $25,000, you’ll only pay $23.75 per year. Compare that to the $137.50 you’d pay per year if you owned the typical stock fund that charges 0.55% annually.

Pay less to own stock in SPY

But some S&P 500 ETFs charge even less. For example, State State offers the SPDR Portfolio S&P 500 ETF (SPLG), which tracks the S&P 500 (it previously tracked the top 1,000 U.S. stocks). But it only costs 0.03%. It’s just one example of a “clone” ETF with a lower fee. These ETFs can save you money.

Then there’s the Vanguard S&P 500 ETF (VOO), which charges just 0.03%, making it 0.01% cheaper per annum than the iShares Core S&P 500 ETF (IVV) at 0.04%. Investing $25,000 will save you $2.50 per year. You can also buy one of these ETFs from most major brokers and pay no trading commission.

ETF Symbol Assets ($ billions) Cost ratio
SPDR S&P 500 ETF trust SPY $379 0.095%
iShares Core S&P 500 ETF IVV $304 0.04%
Vanguard S&P 500 ETF VOO $276 0.03%
Schwab US Large-Cap ETF SCHX $30 0.03%
SPDR portfolio S&P 500 SPLG $15 0.03%
Source: ETF.com

Does SPY pay dividends?

Absolutely, SPY pays dividends. SPY shares collect the dividends issued by all dividend-paying stocks in the S&P 500 – and pay them out to you. And currently the dividend yield on the SPY is about 1.6%. That means if you invest $25,000 in SPY stock, you will receive $400 per year, paid quarterly, on your investment.

SPY Stocks – Is it Buy Now?

If you are a long-term investor, any time is a good time to buy SPY stock. Given how diversified it is, SPY is the ultimate “set and forget” stock. Over the long term, the S&P 500 has returned an average of 9.9% annually since 1928, including dividends, according to IFA.com. You’d be hard-pressed to find much better, cheap games that you can hold on to forever. Also keep in mind that if you buy and hold SPY stock, you will receive the quarterly dividend payment.

Even famed investor Warren Buffett often advises investors to buy and hold the S&P 500.

SPY Technical Analysis – Is it Buy Now?

On the other hand, some investors use SPY stocks more tactically. They dart in and out to accommodate market movements. If you are this type of investor, you should pay more attention to technical actions in the broad market.

IBD’s Market Pulse will tell you if the S&P 500 is in a confirmed uptrend and if it’s a good entry point right now. And Stock Market Today shows you trends in the market that will tell you whether you should be in or out of SPY stocks any time soon.

And there is one last point. It’s true, with the SPY you own all of the biggest big-cap winners. But since you own all the S&P 500 stocks, you also own all the dogs. That can be a problem when the stocks of giant companies with large weightings in the S&P 500 fall.

Likewise, given that the SPY owns so many shares, it’s normal for massive gains to barely make a dent in the ETF’s overall performance. And if a stock only makes up 0.5% of the index, even if it’s rising, it won’t move the needle much.

Still, given the issues, SPY stock is a core holding company with a role in almost every investor’s portfolio.

Follow Matt Krantz on Twitter @mattkrantz

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