02 Aug 2021 22:59
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SPY is the stock ticker for shares of SPDR S&P 500 ETF listed on the NYSE/ARCA. SPDR Trust, Series1 is a unit investment fund that tracks the Standard & Poor’s 500 (S&P 500) Index and is established to yield investment results that correspond to the yield of the index. The fund’s assets include shares of 500 biggest (large capitalization) corporations in the US traded on exchanges. The index is maintained by the Standard & Poor’s (S&P).
History, structure, and governance
The SPDR S&P 500 was the first ETF registered in the USA in January 1993 (SPDR stands for “Standard & Poor’s depositary receipts”).
The fund is managed by State Street Global Advisors. Its shares are exchange-traded and equivalent to the weight of the shares in the composite S&P 500 index.
The aim of the SPDR S&P 500 ETF is to provide an investment instrument with a yield that follows the S&P 500 Index excluding costs (a unit of ownership in the long-term investment trust is called a Standard & Poor’s depositary receipt).
To calculate general indicators, every index needs to have an underlying calculation basis, a basket of securities. Quotes of stock indices reflect their average value; what is important here is not the increase/decrease of the absolute values but the overall dynamics. If the index grows, the country’s economy as a whole is doing fine.
This is an excellent stock exchange instrument for both strategic investors and short-term trades: the SPY is highly liquid and can be easily sold or bought at any time during a trading session. The fund’s basket tracks the S&P 500, therefore this ETF is an optimum investment option on the US stock market with minimum effort. SPY is rebalanced (meaning readjustment of the basket for the changes in the weight of its individual components) quarterly, and the dividends are paid quarterly as well.
Income, capital, and strategies
The S&P 500 index consists of US companies from across the Global Industry Classification Standard (GICS) with unadjusted market capitalization of $8 billion or more. Each company in the index must post positive earnings for both the last quarter and last year. About 70 to 80% of the fund’s capitalization comes from IT, health care, finances, and services. The rest is energy and production.
Investors buy the fund’s shares but do not own the underlying assets. The value of SPY corresponds to 1/10 of the S&P500, and fluctuations of SPDR S&P 500 shares mimic fluctuations of the S&P500.
Circulation of SPDR S&P 500 shares is rather vigorous and is one of the highest in the market. Its average value usually exceeds 70 million shares, and the exchanges see trades in tens, and sometimes millions of SPY shares within one trading session. Investors use SPDR S&P 500 ETF (SPY) because it avails access to a huge number of large American companies with just one purchase. Even 1 SPY share (at about $200) enables a private investor to fully participate in the trading process of the entire US stock market.
The fund’s managers buy and sell shares (as units of current assets) to adjust its assets to the S&P 500 index.
The value of SPY net assets, from its establishment on January 22nd, 1993 till July 31st, 2020, amounted to 9.63%, and the annual yield of the S&P 500 index for the same period was 9.76%. The average annual yield of the ETF historically clings to 9 to 10%, and the dividend yield is 2.0 to 2.9%.
Dividends on the SPY have been paid steadily paid since 1994, and the payments increase most of the time, with reductions only in isolated cases.
The market capitalization of the SPDR S&P 500 ETF grows steadily. In 2017, it amounted to $244.9 billion, and in 2021 it is already $344.7 billion.
Traders can view the value of one SPY unit by looking at the SPY.NV ticker symbol (where NV stands for “net value”). The ticker’s value is updated daily.