The exchange traded fund industry is celebrating 20 years in business. The SPDR S&P 500 ETF (NYSEArca: SPY) is also hitting this milestone, as it was the first ETF to trade.
“SPY ended 2012 with $123 billion in assets, including nearly $16 billion in 2012 alone. Over 147 million shares of SPY tarde on average daily and the ETF serves as a proxy for U.S. equity exposure for many institutional and retail investors. This ETF, the first one in the U.S., launched on January 22, 1993,” S&P Capital wrote in a recent note. [SPDR S&P 500 Eyes 20th Birthday After Record ETF Inflows]
SPY has earned a top “Overweight” ranking from S&P Capital, with positive ranking inputs on six of ten factors measured. Since SPY is market-cap weighted, the largest U.S. mega-caps make up 19.5% of the portfolio. The 0.11% expense ratio, tight bid/ask spread and solid earnings and dividends make this fund appealing to just about every investor.
Other ETFs that track the S&P 500 include iShares S&P 500 Index Fund (NYSEArca: IVV) and Vanguard S&P 500 ETF (NYSEArca: VOO), among others. However, none come close to the popularity and success of SPY. SPY traded on average about $18 billion worth per day in 2012, reports Chris Flood for Financial Times. [A Closer Look at Three S&P 500 ETFs]
SPY gives investors broad-based, affordable exposure to some of the largest U.S.-listed companies, with higher weights going to the most valuable. Individual equities that competed with ETFs for value include Apple (NasdaqGS: AAPL), Google (NasdaqGS: GOOG), Microsoft (NasdaqGS: MSFT), Bank of America (NYSE: BAC) and Citi (NYSE: C). All of these companies are holdings in SPY. [S&P Ranks Largest ETF Managers]
Over the past 20 years the industry has grown to about 750 equity ETFs trading with about 200 fixed-income funds trading as well as a bevy of commodity, currency and leveraged ETFs, and fixed-income. [Surveying S&P 500 ETFs]
SPDR S&P 500 ETF
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.