The World’s Most Popular ETF

Last week, I explained why it’s important to have a working knowledge of the largest ETFs in the industry. This week, I’ll begin to deliver on helping you gain such knowledge, beginning with SPDR S&P 500 ETF (SPY).

The S&P 500 is a well known stock market index that follows a changing selection of 500 companies, and SPY is the most common way to tether your investing results to the index. The S&P had an excellent 2014, so this is a timely moment to discuss it.

Similarly to the index it tracks, SPY gained 11.29% last year. The U.S. stock market had an excellent year on the global stage, though it was not the world’s most profitable. SPY possesses an astonishing $215 billion in assets under management, dwarfing even the second-largest ETF on the market. SPY weights its holdings approximately to the same degree they are used to calculate the S&P itself. Its expense ratio is 0.09%.

Some of the companies that compose the S&P pay dividends and, as such, SPY provides a dividend yield of 1.78%. This chart shows the exact trajectory of its performance throughout 2014.

SPY’s top 10 holdings comprise 17.43% of its assets, and all 10 are names known by the average investor. These holdings include Apple Inc. (AAPL), 3.54%; Exxon Mobil Corporation (XOM), 2.14%; Microsoft Corp. (MSFT), 2.09%; Johnson & Johnson (JNJ), 1.60%; and Berkshire Hathaway Class B shares (BRK-B), 1.49%.

SPY is an accessible way to get exposure to a selection of strong U.S. stocks, but don’t take my word for it — just look at how much capital other investors have poured into it. If you think this vote of confidence is encouraging to you, consider trying SPDR S&P 500 ETF (SPY).

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.