CARR - Is SPY A Good Investment For Beginner ETF Investors?
- SPY is the oldest (US), most actively traded ETF that tracks the S&P 500, to judge it as an investment, investors need to understand the index it replicates.
- The S&P 500 is a semi-actively managed index that only holds a subset of large-cap, profitable stocks, still, it slightly outperforms indexes with a far greater number of holdings.
- The S&P 500 is market-cap-weighted, which means that its value is heavily concentrated in a small number of very popular stocks. It also has a high P/E ratio.
- Historically, the S&P 500 is always heavily concentrated in the most popular stocks, which is a big part of why it is a perfect investment for buy and hold investors.
- Downsides of SPY for beginning investors are that its ER is 3X that of other S&P 500 ETFs and that its leadership in the options market may tempt investors to dabble in hedging holdings with options.
For further details see:
Is SPY A Good Investment For Beginner ETF Investors?