Last Updated on 2021-10-12
Before we start introducing SPY, we should know the difference between The Stock Exchange and U.S. Stock Indexes. The stock exchange is the actual place where trades have been made such as the oldest stock exchange – NYSE. On the other hand, stock indexes are comprised of constituent stocks that, when pooled together, provides an indication of something, i.e. S&P 500.
3 Major Stock Exchanges in the United States :
New York Stock Exchange (NYSE)
National Association of Securities Dealers (NASDAQ)
American Stock Exchange (AMEX)
U.S. Major Stock Indexes :
Dow Jones Industrial Average
S&P 500 Index
Nasdaq Stock Market
NASDAQ Composite Index
Other U.S. Indexes
Get To Know The Well-Known ETF – Ticker : SPY
S&P 500. The full name is the “Standard and Poor’s 500 Index.” S&P 500 is a stock market index tracking the performance of 500 companies listed on the stock exchanges in the United States across NYSE and NASDAQ.
Let’s check out the basic facts :
Ticker : SPY
Brand : SPDR
Inception Date : 1993-01-22
Expense Ratio : 0.0945%
Exchange : NYSE ARCA EXCHANGE
Trading Currency : USD
Assets Under Management(as of Sep 30 2021) : $386,354.81 M
⚫️ It comprises 500 large- and mid-cap U.S. stocks and is one of the most popular ETFs traded in NYSE.
⚫️ SPY’s Morningstar rating is a four-star ETF.
⚫️ 9.96% annual returns achieved by SPY since its inception.
How to Invest SPY?
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What to Expect from SPY?
Let’s take a look at the performance of SPY for the last 21 years. It has its gains and losses. In 2008, it had the worse performance which is -36.97%.
|YEAR||Annual Total Return|
What if we invest 1000 USD in SPY from 2000/1/1 and never input any money again until 2020/12/31. Just use a Dividend Reinvestment Plan(DRIP) throughout the time period. We could see the final result is :
Annualized Return : 6.47%
Total ROI : 273.32%
We started from 2000/1/1 with 1000 USD and it was -9.15% in 2000, -11.86% in 2001 and -22.12% in 2002. It would be devastated for us to encounter this kind of situation in the beginning. But if we could wait for 21 years and do nothing, the annualized return will be good enough for most people which is 6.47%.
Let SPY Do The Work for You – Time Is Your Friend
Jeff Bezos, the Amazon founder, once asked Warren Buffett this question –
“You’re the second richest guy in the world. Your investment thesis is so simple. Why don’t more people just copy you?”
“Because nobody wants to get rich slow.” Warren Buffett said.
That’s the biggest problem. We all know a simple fact that people who work in wall-street are more professional than us. But we just believe that we’re somehow different, we’re unique and we can beat the performance of well-educated financial MBA graduate mutual fund managers.
Secondly, we don’t have patients. We want everything to happen instantly – thanks to technology and fast-food culture. We’re so used to them.
To break it, we have to admit that
1. We’re no smarter than others. Gambling stock price in the short term is ZERO-SUM GAME. If someone wins, then someone will definitely lose.
2. Be patient. Just like Albert Einstein said, “Compound interest is the 8th wonder of the world.” The principle for investment is to grip a piece of the economy. Start with quality ETFs which cover the global markets. And just let time do the heavy-lifting with DRIP.
Compound interest is the 8th wonder of the world.Albert Einstein