Learn about the benefits and versatility of ETFs as an investment option.
This week marks the 30th anniversary of State Street Global Advisors’ introduction of the Standard & Poor’s Depositary Receipt (SPY), the first Exchange Traded Fund (ETF) domiciled in the United States and tracking the S&P 500. The SPDR S&P 500 ETF Trust, or simply “SPDR” (pronounced “Spider”), is the name by which it is known today. With over $370 billion in assets under management, it is the biggest ETF in the world. It is also the most actively traded, regularly transacting over 80 million shares per day for a dollar volume of more than $32 billion. Currently, there are about 2,700 ETFs operating in the United States, with about $7 trillion in assets under management. Although the mutual fund sector is still far larger, at $23 trillion, the difference is getting less every day.
So let’s remind ourselves what is an ETF
An ETF is a mutual fund-like investment instrument, that trades on an exchange like a stock. ETFs are collections of securities that can follow a certain index, like the S&P 500, or a particular industry, like technology.
The SPDR S&P 500 ETF Trust, popularly known as SPY, was introduced by State Street Global Advisors thirty years ago and was the first ETF in the United States. With over $370 billion in assets under management, a daily trading volume that often surpasses 80 million shares, and a dollar volume of $32 billion, the SPDR S&P 500 ETF Trust is now the largest ETF in the world.
The ETF market has expanded quickly since the SPDR S&P 500 ETF Trust was introduced. Currently, there are about 2,700 ETFs in operation in the US, with about $7 trillion in assets under administration. The mutual fund industry still has a $23 trillion market cap, but the difference between the two is getting smaller.
The adaptability and variety of ETFs are their key benefits. They give investors a means to invest in one place and obtain exposure to a variety of assets, including stocks, bonds, commodities, and currencies. ETFs can also be purchased and sold at any time throughout the trading day because they are traded like stocks, which enables investors to make quick changes to their portfolios.
ETFs typically offer lower expense ratios compared to mutual funds and for this reason, they are usually the best asset to own for retail investors. As always it is important to speak to a qualified professional before making an investment decision.
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