SPY Stock: If You Can Only Own One Stock, Make It the S&P 500 ETF
If you track stock market performance, there’s a good chance you watch SPY stock. In fact, the SPDR S&P 500 ETF Trust (NYSE: SPY) is the first and largest of its kind in the U.S.
Created in January 1993, the S&P 500 ETF is designed to mimic the performance of the S&P 500 Index. So far, SPY stock is returning over 25% this year as the ETF continues breaking out into all-time high territory.
Not only that, but investors have earned over 10% annually investing in the SPY ETF since ’93. The returns may not seem like much to investors making +1,000% on crypto this year. But if you consider everything that’s happened in the stock market during that time, the returns are solid.
With the fed suggesting three rate hikes next year, there’s never been a better time to look for some stability. With this in mind, the SPY ETF gives you access to the top 500 companies across the market like Apple and Nvidia.
If owning a basket of the top stocks in the world sound good to you, keep reading to discover if investing in SPY stock is right for you.
SPY Stock Analysis
Lately, there’s a lot of talk about the SPY stock chart and what to expect next. After touching an all-time high of $473.54 last month, the stock is cooling off some with several major market events going on.
Between the Omicron variant and the fed pivoting its stance on support for the economy, this past month is testing market participants. Yet SPY stock is still only 4% off its highs. Being the most closely watched stock to gauge overall market performance, many investors flock to it when things get shaky.
However, SPY is now sitting just below its 50-day SMA, an indicator traders generally use to gauge momentum. At the same time, the $452 price level is a significant support level holding its ground.
If SPY stock breaks support, it can visit lows tested earlier this month, around $450. But with blue-chip stocks like Apple and Microsoft leading the way, don’t expect the dip to last too long.
Top S&P 500 ETF Holdings
You don’t need a ton of money to own a piece of the best businesses out there. And you also don’t need to waste all your time finding promising investment opportunities.
The S&P 500 ETF makes it easy to own a piece of the future with a basket of top large-cap holdings. The best part of investing in SPY stock is gaining exposure to so many different sectors that can help balance your account. With this in mind, here are the top 10 S&P 500 ETF holdings currently.
- Apple (Nasdaq: AAPL) – 5.90%
- Microsoft (Nasdaq: MSFT) – 5.60%
- Amazon (Nasdaq: AMZN) – 4.05%
- Meta Platforms (Nasdaq: FB) – 2.29%
- Alphabet Inc A (Nasdaq: GOOGL) – 2.02%
- Alphabet Inc B (Nasdaq: GOOG) – 1.96%
- Berkshire Hathaway B (NYSE: BRK.B) – 1.45%
- Tesla Inc (Nasdaq: TSLA) – 1.44%
- Nvidia (Nasdaq: NVDA) – 1.37%
- JP Morgan Chase (NYSE: JPM) – 1.29%
As you can see, these are some of the most influential brands around us that are considered leaders in their respective markets. Investing in these separately can be costly, between deciding how much of each you would like to own and commissions.
More importantly, even the most seasoned investors can get caught up in a market like we have right now. It seems a new sector is begin sold off every week. Last week it was growth stocks and semis. What’s going to be next?
SPY Stock by Sector Weight
Another key point to consider is the diversity of your portfolio. Many new investors make the mistake of chasing the most exciting stock of the week rather than looking for long-term growth. A major part of building wealth in the stock market first starts with time in and then a diverse portfolio.
With this in mind, the SPY ETF offers individuals a chance to participate in all industries. If one sector is selling off due to policy changes, the other holdings help balance it out.
That said, below is a layout of the holdings in the SPY by sector to give you an idea of what you are investing in.
- Technology – 24.22%
- Financial Services – 14.23%
- Healthcare – 13.09%
- Consumer Cyclical – 12%
- Communication Services – 11.14%
- Industrials – 8.86%
- Consumer Defensive – 6.32%
- Energy – 2.86%
- Real Estate – 2.57%
- Utilities – 2.45%
- Basic Materials – 2.27%
By investing in SPY stock, not only will you own top companies, but you will also gain exposure to all these industries.
Even if you own several other stocks, investing in SPY can balance your portfolio and provide long-term growth potential. Keep in mind that investing is a game designed for long-term players. The longer you give your money a chance to grow, the better the results will be.
Is SPY Stock a Good Long Term Investment
Looking ahead, the SPY is an excellent way for you to start earning a return in the stock market. Buying SPY Stock gives you exposure to all the companies and industries listed above.
Even if you already own a handful of stocks, adding an ETF such as the S&P 500 index can help you manage risk. Not only that, but it doesn’t get much better than the SPY ETF when it comes to passive income streams.
You can see how well the fund has performed with +10% annual returns since its creation. And on top of this, SPY stock offers a 1.2% dividend yield to kick off the compounding process.
Although funds can be useful for passive income, traders can also use SPY to hedge their positions. Since the ETF is the most widely used indicator of overall market health, traders use options to amplify their returns.
The options buying/selling creates even more demand for the asset. As a result, it tends to stabilize prices over the long term and drive them higher.
It’s not as easy as it may look to outperform a fund such as the SPY on an annual basis. This past year you may have earned +100% returns, but realistically how often does that happen? Stocks go through cycles, and if you don’t have the time or resources to keep up with it, buying SPY stock may be right for you.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.