EBRGF - SPY: Tracking A 500-Stock Index With Just 5 Stocks

• The SPDR S&P 500 ETF (SPY) is largely traded because it's standard and liquid, not because most of its users know or like all 500 names in it.
• I find most "human" investors prefer owning a smaller number of stocks they can know and understand than a fund like SPY holding hundreds or thousands of unknown names.
• In this article, I test the "crazy-sounding" idea of trying to track SPY with just five stocks, using deliberately silly rules like choosing stocks starting with letters A-E.
• Many investors may be surprised how closely these two test portfolios of five stocks each have tracked SPY. This is one consequence/benefit of high correlations.
• There are tax, regulatory, and fundamental reasons why an investor might prefer the five-stock portfolio to SPY, and hopefully, this article provides some practical inspiration.

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