Investment & Finance

Does Being the Most Popular ETF Make SPY the Best?

Jessica Cutter
December 4, 2023
5 minute read
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Warren Buffet famously stated that most investors would be better off putting their money in an S&P 500 index fund, so did most investors interpret that as SPY? For experienced and noob investors alike, SPY is the most recognized ETF across the board. Maybe it’s the age, maybe it’s the success, maybe AI investing supports the numbers, or maybe there’s something mathematically magical about it. Either way, it’s time to explore what makes SPY the most popular ETF. 

What is SPY?

The SPDR S&P 500 ETF Trust, better known by its ticker name SPY, has a goal to track the Standard & Poor’s 500 Index, which is made up of 500 large-cap stocks in the U.S. SPY is traded, on average, 14 million times a day, which makes it the largest and most traded ETF that tracks the S&P 500. Just by the fact that it tracks the S&P 500 and has the numbers that it does, obviously, it’s going to attract investors, especially those that want to invest in large-cap companies, but what else contributed to SPY’s popularity? 

Why is SPY so popular?

A significant factor that launched SPY into popularity is that it was the first ETF on the U.S. market. The first ETF makes it the most recognized age, with its debut on January 22nd, 1993. As both the first ETF and the nature of the index it replicates, SPY is often thought of as the ETF that initiated tracking the S&P 500. Once again, giving it credit for groundbreaking initiatives on the market.

Just because it was the first doesn’t automatically mean it’s successful; however, SPY has an average annual return of 10%. It’s more impressive to consider how, at the original introduction, it was valued at $6.53 million, and now, in November of 2023, it has over $400 billion worth of assets. Clearly, the 10% is worth it. 

SPY's return rate and overall success are due to the large-cap stocks that the ETF holds, which are part of the S&P 500. If you want typical “market returns,” then SPY is the place to be. With the semi-active management focused on profitable stocks, SPY is attractive to new investors, buy-and-hold investors, occasionally day traders, long-term investors, Warren Buffet fans, and more. 

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What are the benefits of investing in SPY?

Obviously, prestige and success excite people in trading, and luckily, SPY comes with several benefits that are typical for an ETF. These benefits are mainly what Buffet was trying to hint at for investors that are often overlooked in average portfolios. 

  1. Instant Diversification
  2. Low-Effort Investment 
  3. Positive Long-Term Strategy

Long-term investing that diversifies your portfolio with low-effort management is the dream combination. Does that mean SPY is the best ETF? Unfortunately, just like everything else in the market, it’s never that simple. Only investing in SPY will limit the potential to build substantial amounts of wealth, and although SPY provides those benefits, if you stop at those experiences with a 10% return rate, you could be missing out on bigger better opportunities. For example, investing in AI can amplify your portfolio even more than one ETF like SPY. 

alphaAI’s approach!

Remember how Buffet said average investors should consider ETFs that track the S&P 500? That bit of advice came out because oftentimes, the nuances of the market are too complex for individual investors to navigate. However, in 2023, with AI investing, that’s no longer the case. 

Although SPY provides benefits in multiple areas while being low maintenance, it’s possible to have even more significant returns with active management while remaining hands-off as an investor. The goal should always be to improve, and the technology behind alphaAI allows investors to invest in ETFs like SPY and expand their portfolios to include other top ETFs, such as IVV, VUG, and VTV. Our AI investment technology automatically adapts to market conditions so that you're always optimally positioned to achieve your financial goals.


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