SPY

Get Started

What Is SPY?

SPY is an investment that lets you own tiny pieces of 500 of the biggest and strongest companies in America all at once.
To understand SPY, we start with the basic idea of an index, then learn about the S&P 500, and finally see how SPY connects to it.

1. What Is an Index?

An index is simply a list of companies grouped together to represent a part of the stock market.

You can think of it as:

  • a scoreboard

  • a collection

  • or a “team” of companies

Indexes help us understand how a large group of companies is performing without looking at each company one by one.

Different indexes track different types of companies, but one of the most famous ones is the S&P 500.

Click HERE to learn more about indexes.

2. What Is the S&P 500 Index?

The S&P 500 is an index made up of 500 of the most important and successful companies in the United States.
These include companies like Apple, Amazon, Microsoft, Google, Disney, Nike, and Coca-Cola.

The S&P 500 is one of the best ways to measure how the U.S. economy is doing.
When these companies grow and make money, the S&P 500 goes up.
When they struggle, the S&P 500 goes down.

Because it includes many industries, the S&P 500 is very diversified, meaning your risk is spread across many different types of companies.

3. How SPY Connects to the S&P 500

SPY is an investment that follows the S&P 500 index.

This means:

  • SPY owns shares of the same companies in the S&P 500

  • SPY moves up when the S&P 500 moves up

  • SPY moves down when the S&P 500 moves down

SPY’s entire purpose is to copy the S&P 500 as closely as possible.
It gives you an easy way to invest in all 500 companies at once without having to buy them individually.

SPY is one of the oldest and most trusted ways to invest in the S&P 500.

4. How SPY Has Performed Over Time

SPY started in 1993. Since then, it has grown extremely well:

  • About 10 percent growth per year on average

  • About 10.5 to 11 percent growth including dividends

  • Price rose from around 43 dollars in 1993 to about 560 dollars today

SPY has grown more than thirteen times its original price.
Even after crashes and recessions, it has always recovered and reached new highs.

5. Why SPY Is Considered Safe

SPY is seen as a safe long-term investment for several reasons:

  1. You are investing in 500 companies, not just one.

  2. If a company becomes weak, it is removed from the S&P 500 and replaced with a stronger one.

  3. The strongest companies naturally take up more space in the index.

  4. The U.S. economy tends to grow over long periods of time.

  5. SPY has recovered from every crash in history.

  6. SPY has very low yearly fees (only 0.09 percent).

All of this makes SPY stable, diversified, and reliable.

6. How Much SPY Typically Grows Each Year

Long-term growth is usually around 10 percent per year.

In more recent years:

  • About 12 percent per year over the last decade

  • About 13 to 14 percent per year over the last five years

Year-to-year changes happen, but the long-term trend is positive.

7. How SPY Can Grow Your Money (Compounding)

If you invest 100,000 dollars into SPY and it grows around 10 percent per year, your money can become:

  • About 259,000 dollars after 10 years

  • About 672,000 dollars after 20 years

  • About 1.74 million dollars after 30 years

  • About 4.52 million dollars after 40 years

This is the power of compounding: your money grows, and then that growth also grows.

8. Downsides of SPY

Even though SPY is very safe, it still has some downsides:

  • It will not grow as fast as very risky individual stocks.

  • It will drop during market crashes.

  • Its dividend is small because most companies inside it focus on growth.

SPY is not for getting rich quickly.
It is for building wealth slowly and safely.

9. Why SPY Is Great for Kids, Teens, and Beginners

SPY is one of the best starting points for new investors because:

  • It is easy to understand

  • It spreads risk across 500 companies

  • It includes many of the strongest companies in the world

  • It has a long history of growth

  • It has very low fees

  • It works extremely well for long-term saving

SPY is basically 500 companies in one simple investment, making it a powerful and safe choice for anyone beginning their investing journey.

FAQs

  • A special committee reviews companies regularly.
    If a company becomes weak, unprofitable, or less important, it can be removed and replaced by a stronger company.

  • Companies get removed when they:

    • become too small,

    • lose money for long periods,

    • get bought by another company, or

    • are no longer important enough in the U.S. economy.

    This keeps the S&P 500 full of strong, high-quality companies.

  • No. The market goes up and down.
    Some years SPY may rise more than 20 percent, other years it may fall.
    But over long periods (10–20+ years), the average has been close to 10 percent.

  • SPY can drop during recessions, crashes, or bad economic periods.
    But historically, after every major decline, SPY eventually made new all-time highs.

  • When you buy just one company, you take the risk that the company may fail.
    With SPY, even if 1 company fails, there are 499 others still growing.
    This spreads risk and makes losses much smaller.

  • Teens cannot invest alone, but they can invest through a custodial account with a parent.
    Many families use UTMA or brokerage custodial accounts to invest for kids and teens.

    Click HERE to learn more.

  • Yes. SPY pays small dividends four times a year.
    Most people reinvest these dividends to help their money grow faster.

  • No. SPY is best for long-term investing, such as:

    • saving for college

    • saving for the future

    • building wealth over many years

    Short-term market moves can be unpredictable.