What Is SPDR? A Closer Look at the Popular ETFs

SPDR ETFs, also knowns as SPDRs or “spiders,” include the first U.S.-listed exchange-traded fund and some of the largest ETFs on the market as measured by assets under management. But what exactly is SPDR, and what do investors need to know about these ETFs? 

What Is SPDR? 

SPDR, short for Standard & Poor's Depository Receipts, is a type of exchange-traded fund that tracks the performance of a specific market index or asset. Introduced in 1993 by State Street Global Advisors, SPDRs are one of the most popular ETFs in the world as measured by assets under management. 

Like other ETFs, SPDRs are traded on stock exchanges just like stocks, and their price changes throughout the day based on the performance of the underlying index or asset being tracked. For example, one of the largest SPDR ETFs is the SPDR Gold Trust (GLD), which is designed to track the spot price of gold.

Other SPDR ETFs track different stock indices, such as the S&P 500, Dow Jones Industrial Average, Nasdaq Composite and Russell 2000. They may also track a specific sector index, such as the Technology Select Sector Index. 

SPY vs. SPDR ETFs 

SPY ETF and SPDR ETF are often used as interchangeable terms, but the SPDR S&P 500 ETF Trust (SPY) is just one of dozens of SPDR ETFs available on the market today. For example, SPY seeks to track the performance of the S&P 500 index and is widely used as a benchmark for the performance of large cap U.S. stocks. However, many SPDR ETFs track the performance of a specific sector benchmark index. 

How Many SPDR ETFs Are Available? 

There are 141 SPDR ETFs available on the market. SPDR ETFs have total assets under management (AUM) of $964.37 billion. The average expense ratio is 0.27%. Investors can buy and sell SPDRs through a brokerage account, and they can be held in a variety of investment accounts, including individual retirement accounts (IRAs) and 401(k) plans. 

What Types of SPDR ETFs Are Available? 

SPDR ETFs can be found in multiple asset classes, including fixed income, equity, commodities, asset allocation and alternatives. The SPDR ETF family offers a wide range of investment options, including a range of broad market ETFs, sector equity ETFs, industry-specific ETFs and commodity ETFs. 

Most Popular SPDR ETFs by AUM 

The largest SPDR ETF is the SPDR S&P 500 ETF Trust (SPY), which, in 1993, became the first ETF to be traded on a U.S. exchange. The “select sector” SPDR ETFs are also popular with investors. The SPDR sector ETFs cover all 11 sectors of the stock market, including information technology, health care, energy and financials, to name a few. 

Here are the largest SPDR ETFs based on AUM as of March 24, 2023: 

Benefits and Risks of SPDR ETFs 

Like many other ETFs, one of the benefits of investing in SPDRs is their low expenses. Since SPDRs are passive investments, they don't require active management, which helps to keep their expense ratios low. However, like other ETFs, SPDRs have associated risks, such as market risk and the potential for tracking error.  

Here are some of the key benefits and risks of investing in SPDR ETFs: 

Benefits of Investing in SPDR ETFs 

• Diversification: By investing in a single SPDR ETF, you can gain exposure to a diversified portfolio of stocks or other assets. This can help reduce the risk of investing in individual stocks or sectors. 
• Capture trends: SPDR ETFs focusing on a specific sector or industry can also be added to a portfolio of ETFs or other investments as a means of capturing secular or cyclical industry trends. 
• Low costs: SPDR ETFs typically have low expense ratios compared to actively managed mutual funds. This means that investors can keep more of their returns and potentially earn higher returns over time. 
• Transparency: The holdings of an ETF are disclosed on a daily basis, which allows investors to know exactly what they are investing in and how their investments are performing. 
• Liquidity: SPDR ETFs can be bought and sold on stock exchanges throughout the day, which provides investors with the ability to enter and exit positions quickly. 

Risks of Investing in SPDR ETFs 

• Market risk: SPDR ETFs are subject to market risk, which means that the value of the ETF can decline as a result of changes in the underlying index or market conditions. 
• Tracking error: While ETFs are designed to track the performance of their underlying index, there can be tracking errors due to factors such as fees, expenses and trading costs. 
• Sector concentration risk: If you invest in a sector-specific SPDR ETF, you are subject to concentration risk. This means that if the sector performs poorly, your investment may suffer. 
• Liquidity risk: While SPDR ETFs are generally liquid, there may be times when there is limited trading volume, which can impact the ability to buy or sell the ETF at a fair price. 

Bottom Line 

SPDR ETFs include a wide range of funds, including broad market index ETFs and a number of sector equity ETFs. Investing in SPDR ETFs can offer several benefits, but it is important to understand the potential risks as well. As always, investors should do their research and consider their investment goals, risk tolerance and time horizon before investing in any ETF.