SPTM - SPTM: Good To Get Mid And Small-Cap Exposure

2023-12-15 16:59:02 ET

Summary

• Consider investing in the SPDR® Portfolio S&P 1500 Composite Stock Market ETF for exposure to a diversified portfolio of U.S. stocks across all market capitalizations.
• The SPTM ETF has a low expense ratio of 0.03% and holds top positions in companies like Apple, Microsoft, and Amazon.
• The ETF offers comprehensive exposure to the U.S. equity market, but its performance is subject to market volatility.

I prefer more total market funds than just large-caps alone entering next year. There is a legitimate argument that the next cycle should be dominated by outperformance in mid caps and small caps, so getting some exposure there makes sense. That's why the SPDR® Portfolio S&P 1500 Composite Stock Market ETF ( SPTM ) is worth considering here.

SPTM is an exchange-traded fund, or ETF, that tracks the performance of the S&P Composite 1500® Index. This index is designed to measure the performance of the large-, mid-, and small-capitalization segments of the U.S. equity market. Managed by SSGA Funds Management, Inc., SPTM gives investors comprehensive exposure to the U.S. equity market, encompassing stocks across all market capitalizations.

As of December 2023, the net asset value ((NAV)) of SPTM stands at $58.01, with assets under management totaling approximately $7 billion. The fund has a gross expense ratio of 0.03%, making it a low-cost option for investors looking for broad market exposure.

ETF Holdings: Top 5 Individual Positions

The SPTM holds a diversified portfolio of U.S. stocks. The top five individual positions are:

1. Apple Inc. (AAPL) - With a weightage of approximately 6.70% in the fund's portfolio, Apple Inc is a global technology giant known for its innovative products and services.

2. Microsoft Corp (MSFT) - Accounting for 6.26% of the ETF's holdings, Microsoft Corp is a multinational technology company with a diverse product and service portfolio.

3. Amazon.com, Inc. (AMZN) - With a weightage of 3.08%, Amazon.com Inc is a world leader in e-commerce, cloud computing, and artificial intelligence.

4. Nvidia Corp (NVDA) - Making up 2.75% of the fund's portfolio, Nvidia Corp is a multinational technology company primarily known for its innovations in graphics processing units (GPUs).

5. Alphabet Inc. Class A (GOOGL) - With a weightage of 1.80%, Alphabet Inc is the parent company of Google, one of the world's leading search engines and technology companies.

Note that this is start largely a large-cap fund, with around 74% considered large cap.

Sector Composition and Weightings

SPTM's holdings are spread across various sectors, ensuring a diversified portfolio. The top five sectors by weightage are:

1. Information Technology - The largest sector in the portfolio, with a weightage of 27.40%.

2. Financials - This sector accounts for 13.43% of the portfolio.

3. Health Care - With a weightage of 12.27%, the healthcare sector represents a significant part of the ETF's holdings.

4. Consumer Discretionary - This sector, which includes companies that provide goods and services that are considered non-essential, makes up 11.39% of the fund's portfolio.

5. Industrials - Industrial companies comprise 9.47% of the ETF's holdings.

Peer Comparison: SPTM vs. Other Similar ETFs

When compared to other similar ETFs such as the Vanguard Total Stock Market ETF ( VTI ), iShares Core S&P Total U.S. Stock Market ETF ( ITOT ), and Schwab U.S. Broad Market ETF ( SCHB ), SPTM holds its own. While the total returns, standard deviation, and expense ratio are comparable across these ETFs, SPTM stands out for its low turnover ratio and the comprehensive exposure it provides to the U.S. equity market.

Pros and Cons of Investing in SPTM

Like any investment, SPTM has its pros and cons:

Pros :

• Diversification : SPTM offers investors exposure to a broad range of U.S. stocks across various sectors and market capitalizations.

• Low Fees : With a gross expense ratio of just 0.03%, SPTM is a cost-effective investment option.

• Market Exposure : The ETF seeks to replicate the performance of the entire U.S. stock market, reducing the need for investors to research individual stocks or sectors.

Cons :

• Market Volatility : Being tied to the entire U.S. stock market, SPTM's performance is subject to market volatility.

• Limited Growth Potential : Since the ETF tracks the overall stock market, its growth is limited to the market's performance.

• Lower Yield : Compared to other investment options, the ETF's yield is relatively low.

Conclusion: Is Investing in SPTM a Good Idea?

The SPDR® Portfolio S&P 1500® Composite Stock Market ETF offers investors a low-cost option to gain comprehensive exposure to the U.S. equity market. It's a good core fund, and having exposure to mid caps and small caps makes sense to me if someone wants to maintain a bullish stance on U.S. stocks into 2024.

For further details see: