Exchange traded funds (ETFs) are now one of the most popular publicly-traded investment vehicles on the market, with nearly $3.5 trillion in assets under management across all ETFs as of 2018, and it all started with the SPDR S&P 500 ETF Trust (SPY), which launched as the first-ever ETF on January 22, 1993. Named for the Standard & Poor’s Depositary Receipts, SPY tracks the S&P 500 stock market index and is today the largest ETF in the world with roughly $280 billion in assets under management.

The S&P 500 Index holds large cap U.S. companies across all 11 GICS sectors, and SPY is designed to mirror that weighting, effectively tracking the broad U.S. stock market. SPY’s top holdings include (in order): Microsoft (4.43%), Apple (4.37%), Amazon (2.81%), Facebook (1.85%), Berkshire Hathaway Class B (1.66%), JPMorgan Chase (1.61%), Alphabet (1.53% Class C and 1.52% Class A), Johnson & Johnson (1.37%) and Visa (1.22%).

The ETF’s gross expense ratio is 0.0945% and each share is designed to be worth 1/10 of the cash S&P 500’s current level.


Naturally, the most direct way to gain exposure to the holdings in SPY is to buy its listed shares. But there are a number of good reasons for investors to reconsider that approach. SPY is weighted to directly mirror the S&P 500, with a heavy focus toward technology, but it is worth considering if that is the correct approach going forward. Rather than buying SPY shares themselves, investors interested in gaining exposure to the broad S&P 500 Index might consider buying funds that provide exposure to its top-weighted sectors, including information technology, healthcare and energy, in order to spread out their investments even more broadly than SPY does. After all, the return drivers that will benefit SPY might also benefit other funds that are even more diversified.

Investing in SPY

A search on Magnifi suggests that investors can gain access to the S&P 500 via a number of different funds and other ETFs, including those shown below. 

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