What SPY actually is

SPY is the oldest exchange-traded fund in the United States. It launched in January 1993 and holds the stocks of the S&P 500, the index of roughly 500 of the largest US companies. Owning one share gives you a small slice of all of them, from Apple and Microsoft to Johnson & Johnson and ExxonMobil.

Its name comes from “Standard & Poor’s Depositary Receipts”, which is why it is still nicknamed “the spider”. The fund was long called the SPDR S&P 500 ETF Trust and was renamed the State Street SPDR S&P 500 ETF Trust in January 2026. The ticker stayed the same.

How it works

SPY aims to match the index, before costs, by holding the same stocks in about the same proportions. It is run by State Street. The fund has been the largest ETF in the world for most of its life, until Vanguard’s S&P 500 fund (VOO) overtook it in assets in early 2025.

What makes SPY unusual is its legal form. It is a unit investment trust, an older structure with no board or portfolio manager. It cannot lend out its shares for extra income and cannot reinvest dividends between payment dates, and it has a built-in expiry date (far in the future, in 2118 or sooner under a specific legal formula).

Costs and distributions

SPY’s fee has historically been higher than that of the cheapest S&P 500 funds, such as those from iShares and Vanguard, which hold the same index. On a large portfolio that difference adds up, so compare current expense ratios before you choose.

SPY pays distributions quarterly, made up of the dividends of the companies it holds. The yield is modest because the S&P 500 is dominated by growth-oriented companies that pay little, so SPY is a core holding for growth and diversification more than for income.

What to keep in mind

  • Concentration at the top. A handful of mega-cap technology companies make up a large part of the index.
  • Fees compared with rivals. For long-term buy-and-hold investors, check whether a lower-cost fund holding the same index would suit you better.
  • Trading advantages. SPY has enormous volume and a large options market, which is why traders and institutions like it.

Quick take

SPY is the original S&P 500 fund and still the most actively traded. It does the job, but for patient investors holding for decades, IVV or VOO offer the same exposure at a lower cost.