SPY and SPX generally move in tandem as SPY is an ETF that tracks the S&P 500 Index, which SPX represents. Both reflect the performance of the same set of underlying stocks in the index.
SPY (SPDR S&P 500 ETF Trust) on the other hand, is an ETF (exchange-traded fund) that also tracks the S&P 500 but can be traded like a stock and also has tradeable options. SPY equates to approximately 1/10th the value of SPX.
The S&P 500 index contract tracks the 500 of the largest publicly-traded company in the United States. In most cases, traders with more capital lean towards using SPX options, while those with less tend to use SPY. This is because SPX costs 10 times more than SPY, as you'll read more about below.
As such, the average return in SPY closely mirrors that of the S&P 500. The S&P 500 assumed its current size and name in 1957, however, its origins as a composite index date back to the 1920s.
S&P 500 ETFs are exchange-traded funds that passively track this influential U.S. large-cap index. Three of the most popular ETFs that track the S&P 500 are offered by State Street (SPDR), Vanguard (VOO), and iShares (IVV). Index ETFs tend to have lower expense ratios compared to the industry average.
SPY is priced lower than SPX because it's an ETF designed to track the S&P 500 at 1/10th of its price. So, if the S&P 500 index (represented by SPX) is trading at 4500, SPY would typically be trading around 450.
In the past year, QQQ returned a total of 24.57%, which is slightly higher than SPY's 23.53% return. Over the past 10 years, QQQ has had annualized average returns of 18.38% , compared to 13.08% for SPY. These numbers are adjusted for stock splits and include dividends.
SPY is more expensive with a Total Expense Ratio (TER) of 0.0945%, versus 0.03% for VOO. SPY is up 28.31% year-to-date (YTD) with +$7.13B in YTD flows. VOO performs better with 28.36% YTD performance, and +$103.99B in YTD flows.
The SPY is a singular trading vehicle, instead of scanning 100-200 stocks to find movers, the SPY usually has some really good moves daily. The SPY options have 3 expiration a week, meaning you have more choice and liquidity. The SPY options on a shorter term basis are cheap (can find options under $1.00 or $100)
Some things to consider when thinking about how the S&P 500's price will move include factors such as company earnings per share, revenue, major news involving the companies listed on the exchange, economic data, major political events, and interest rates.
The difference reflects the cost of carry in futures, which includes dividends from the S&P 500 stocks and interest rate costs to finance the portfolio over the futures contract's duration. Whether /ES trades at a discount or premium to SPX depends on the relationship between the interest rate and dividend yield.
The price action of the S&P 500 and the VIX often shows inverse price action: when the S&P falls sharply, the VIX rises—and vice versa.
Warren Buffett believes an S&P 500 index fund is the best way for most people to get stock market exposure. That's because buying individual stocks requires a level of commitment that exceeds what most investors are willing to undertake.
As long as your time horizon is three to five years or longer, an S&P 500 index fund could be a good addition to your portfolio. However, any investment can produce poor returns if it's purchased at overvalued prices.
Looking at the S&P 500 from 2013 to mid-2023, the average S&P 500 return for the last 10 years is 12.39% (9.48% when adjusted for inflation), which is also higher than the annual average return of 10%.
Invesco QQQ ETF (QQQ) is an exchange-traded fund that tracks the Nasdaq-100 Index™. The index includes the 100 largest non-financial companies listed on the Nasdaq, based on market cap. You can access the performance of these 100 companies with an investment in QQQ.
VTI targets investing in US Equities, while SPY targets investing in US Equities. VTI is managed by Vanguard, while SPY is managed by State Street (SPDR). Both VTI and SPY are considered high-volume assets. They're less likely to be affected by issues like slippage and failed orders on Composer than low-volume assets.
If you traded any broad-based index options that are cash-settled, such as SPX, NDX, VIX, any outright futures contract, or option on futures, any gains/losses are subject to different tax treatment–60% long-term and 40% short-term.
Ramsey recommends investing in four types of mutual funds: growth and income funds, growth funds, aggressive growth funds, and international funds. What is Dave Ramsey's recommended asset allocation? Ramsey recommends a 100% stock portfolio, with no allocation to bonds or other fixed-income investments.
Invesco S&P 500 Momentum ETF (SPMO)
The SPMO holds $3.95 billion in total assets and has consistently outperformed the S&P 500. Over the past five years, SPMO has an annualized total return of 19.8%, compared with the S&P 500's 13.7%.
Vanguard S&P 500 ETF (VOO) and Vanguard S&P 500 Index ETF (VFV) belong to the same industry segment: US Large Cap. VOO's top 3 sector exposures are Information Technology, Consumer Discretionary and Financials. In contrast, VOO is less expensive with a Total Expense Ratio (TER) of 0.03%, versus 0.09% for VFV.