You might be sitting back and considering the SPDR S&P 500 Trust ETF (ASX: SPY) and thinking that January could be as good of a time as any to take closer look. Here’s how we would start our research.
Find out what the ETF does
The SPDR SPY ETF is the oldest ETF in the world and provides exposure to the 500 largest US-listed shares. These 500 shares represent approximately 80% of the total market capitalisation of the US stock market.
SPY’s FUM does not meet our minimum hurdle
The SPDR SPY ETF had $50.81 million of money invested when we last pulled the monthly numbers. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small.
We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). This is because if an ETF is too small, it may not be sustainable for an ETF issuer/provider, such as SPDR, to continue to operate it.
That said, there are exceptions to this rule of thumb, especially if the ETF issuer is committed to growing the ETF’s FUM to the point where it becomes profitable.
Pay attention to yearly costs & fees
SPDR charges investors a yearly management fee of 0.09% for the SPY ETF. This means that if you invested $2,000 in SPY for a full year, you could expect to pay management fees of around $1.80.
For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.5% or around $10.00 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
Our takeaway
If you’re thinking about investing in SPY, bear in mind that this is just an introductory glance at the ETF. To explore further, check out our free SPDR SPY report. And for good measure, search our complete list of ASX ETFs for similar ETFs in the International shares sector to do a good comparison.
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