Here are the top 7 reasons why you should consider investing in the SPY ETF (SPDR S&P 500 ETF Trust), the first exchange-traded fund in the United States and one of the largest ETFs in the world by market cap.
With over $630 billion in assets under management (AUM), SPY ETF is among the most popular and heavily invested ETFs on the market. With over 500 premium stocks, who wouldn’t want to consider adding SPY ETF to their portfolio?
Perhaps you’re already among those investors who own SPY ETF shares. But if you’re still pondering whether to invest in SPY ETF, here are our insights on why we believe this asset belongs among our favorite exchange-traded funds.
What is SPY ETF?
SPY ETF is also known as SPDR S&P 500 ETF Trust. It tracks the performance of the S&P 500 index. SPY ETF is created as a unit investment trust and offered by State Street Global Advisors. SPDR S&P 500 ETF Trust is the oldest exchange-traded fund listed in the USA.

7 Reasons Why Invest in SPY ETF (SPDR S&P 500 ETF Trust)
1. SPY ETF has High-Quality Holdings
Since SPY’s benchmark is the S&P 500 Index, it invests in over 500 excellent companies. As of February 1, 2025, SPY ETF holds 504 stocks. The components are carefully selected from leading, highly liquid companies with consistent positive earnings.
Approximately 30% of the fund is allocated to the information technology sector. SPY ETF’s top 10 holdings include Apple, Microsoft, Amazon, Alphabet (GOOG and GOOGL), Meta Platforms (formerly Facebook), Tesla, NVIDIA, Berkshire Hathaway, and Broadcom.
The fund also invests in the healthcare, consumer discretionary, financials, communication services, industrial, consumer staples, energy, real estate, and utilities sectors.
2. The Performance of SPY ETF is always Outstanding
The performance of SPY is consistently outstanding, often surpassing the average returns of other major investment funds.
According to Seeking Alpha, the total price return of the SPDR S&P 500 Trust ETF over three years is 42%, and 98% over five years. However, past performance does not guarantee future results.
3. Investing in SPDR S&P 500 ETF Trust is Very Affordable
The easiest way to invest in the S&P 500 index is by investing in an index fund or ETF (exchange-traded fund). Investing in SPY exchange-traded fund is very affordable. Some brokers and trading platforms even accept fractional shares of many ETFs like SPY.
Even the legendary investor Warren Buffett recommends investing in an S&P 500 low-cost index fund regularly.
4. Investing in SPY ETF Offers Diversification
Investing in SPY ETF is less risky than investing in individual stocks because you’re allocating your capital across more than 500 of the USA’s largest and most dominant companies.
It offers diversification by investing in eleven prominent business sectors, reducing the risk of exposure to just one or a few industries.
In addition to diversification, SPY ETF can also be used as a hedge if you have significant capital invested in individual stocks.
5. SPY ETF Pays Dividends Quarterly
If you enjoy receiving quarterly dividends, consider investing in the SPY exchange-traded fund. It offers a dividend yield of 1.30% with an annual dividend of $7.862192. The 3-year compound annual growth rate (CAGR) is 7.30%.
6. It is Very Convenient to Trade SPY ETF
Unlike mutual funds, ETFs are very convenient to trade. You can buy or sell shares of the SPY ETF on any trading day. Just like stocks, you can apply your own trading strategies—buy, hold, or sell at your own pace. If you’re a skilled tactical trader, you’ll appreciate the flexibility of trading the SPDR S&P 500 Trust ETF.
7. SPY ETF is Ideal for Long-Term Investing
The S&P 500 Index will always play a significant role in the global financial market. We believe it will continue to grow despite economic challenges and recover after every recession.
Investing in a fund like the SPDR S&P 500 Trust ETF provides passive income opportunities for long-term investors, as its components are carefully selected based on consistent earnings, market capitalization, and stability.

Top 25 Holdings of SPY ETF By Weight
SPY ETF mimics the performance of the Standard & Poor’s 500 index. The top 25 constituents of SPY ETF as of January 31, 2025, are:
- Apple Inc. (AAPL)
- Microsoft Corp. (MSFT)
- NVIDIA Corp. (NVDA)
- Amazon.com Inc. (AMZN)
- Meta Platforms Inc. Class A (META)
- Alphabet Inc. Class A (GOOGL)
- Tesla Inc. (TSLA)
- Broadcom Inc. (AVGO)
- Alphabet Inc. Class C (GOOG)
- Berkshire Hathaway Inc. Class B (BRK.B)
- JPMorgan Chase & Co. (JPM)
- Eli Lilly &. Co. (LLY)
- Visa Inc. Class A (V)
- UnitedHealth Group Inc. (UNH)
- Exxon Mobil Corp. (XOM)
- Mastercard Inc. Class A (MA)
- Costco Wholesale Corp. (COST)
- Walmart Inc. (WMT)
- Netflix Inc. (NFLX)
- Home Depot Inc. (HD)
- Procter & Gamble Co. (PG)
- Johnson & Johnson (JNJ)
- Salesforce Inc. (CRM)
- Bank of America Corp. (BAC)
- AbbVie Inc. (ABBV)
Source: State Street Global Advisors
What are the Risks of Investing in SPY ETF?
Although SPY ETF is very attractive for both beginners and experienced investors, it is not exempt from market volatility and risk. Stock market indices, including the S&P 500, may suffer from sudden market crashes, periodic corrections, economic downturns, short sell-offs, trade wars, and Fed rate hikes.
Many traders believe SPY is overpriced since it recently reached an all-time high, and they anticipate a potential correction at any moment. The admirable yields and returns of SPY in the past are never a guarantee of future results.
Exchange-traded funds like the SPDR S&P 500 Trust ETF are not suitable for investors who do not understand the risks and vulnerabilities of the stock market.
How to Invest in SPY ETF?
- Get to know your risk profile
- Have an investment objective
- Have an investment strategy
- Open an online trading account
- Search for the ticker SPY
- Open a trade position
- Follow your strategy and objective
Other Stock Market Index Investments You Should Know:
- How to Invest in Index Funds (Complete Guide)
- Best Vanguard ETFs to Invest for Long Term Growth
- 101 Holdings of QQQ ETF
What is the expense ratio of SPY ETF?
The gross expense ratio of SPDR S&P 500 ETF Trust (SPY) is 0.0945%. Expense ratio is an important factor to consider when choosing an investment like SPY ETF because a lower expense ratio contributes to higher profitability.
Which is the better ETF? SPY ETF vs. VOO
Both SPY and VOO ETF track a similar index, the S&P 500; thus, their performances are the same. However, VOO’s expense ratio of 0.03% is slightly cheaper than SPY’s 0.0945%. It boils down to the size of your capital because you would feel the difference when you used a five or six-figure fund.
Disclaimer: This article is for informational purposes only and reflects the author’s perspective and opinion. ETFs and stocks carry risks and may result in the loss of money. Past performance is not a guarantee of future results. Always do your own research or consult an expert before making investment decisions that align with your financial goals and risk tolerance. The author has no business relationship with any of the companies mentioned.
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