This is the World’s Most Popular ETF

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

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_010915

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.

Exclusive  Did Your Portfolio Have 20 Double-Digit Percentage Wins in 2015?

In case you missed it, I encourage you to read my e-letter column from last week about the top 20 biggest ETFs. I also invite you to comment in the space provided below.

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If the first six trading days of 2015 are any harbinger of what’s to come for the entire year, then strap on your seatbelts and get ready for an “A-ticket” rollercoaster ride.

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