# SPDR ETFs Explained: Tracking the S&P 500, Origin, & Examples

## What Does "Spider" Mean?

SPDR ETFs are exchange-traded funds (ETFs). Also called Spiders, they are designed to track the S&P 500, so they give investors a way to invest in the overall market. They were created after the 1987 Black Monday crash to offer a safer way to invest in broad market indexes. SPDRs are popular with individual and institutional investors for passive or index investing. Investors can choose from a broad range of SPDR ETFs to diversify their portfolios. These ETFs trade like stocks, offer good liquidity, and pay dividends, making them a flexible and widely used investment option.

### Key Takeaways

*   SPDR ETFs, known as Spiders, provide a way to track the S&P 500 index and specific sectors.  
    
*   SPDRs offer benefits like liquidity, stock-like trading, and regular dividend payments.  
    
*   Created post-1987 crash, SPDRs have grown into a multi-trillion-dollar market component since their 1993 inception.  
    
*   SPDR S&P Dividend and Regional Banking ETFs offer focused diversification within the S&P 500.  
    
*   SPDRs compete with mutual funds by providing transparent investment options based on net asset value.

## How SPDR ETFs Work: A Comprehensive Guide

Spiders are listed under the [ticker symbol](https://www.investopedia.com/terms/s/stocksymbol.asp) SPY. Spiders trade like stocks, offering continuous [liquidity](https://www.investopedia.com/terms/l/liquidity.asp), can be short sold, bought on margin, pay regular dividends, and involve brokerage [commissions](https://www.investopedia.com/terms/c/commission.asp).

Spiders are used by large institutions and traders as bets on the overall direction of the market. Individual investors also use them for [passive management](https://www.investopedia.com/terms/p/passivemanagement.asp) or index investing. In this way, spiders compete with S&P 500 index funds and offer an alternative to mutual funds.

> **Important**
>
> SPDRs can be purchased and sold through a brokerage account, meaning that strategies that use stop-losses and limit orders can be implemented.

SPDRs offer value like mutual funds, but they trade like common stocks. For example, SPDR returns are calculated using net asset value (NAV), like a fund, based on the group’s total value.

## The Evolution of SPDR ETFs: From Inception to Growth

SPDRs arrived in 1993 after the [Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp) issued a 1988 report faulting automated orders for all index stocks for contributing to the "Black Monday" crash of 1987. The report stated that an instrument for trading a basket of stocks at one time could prevent the problem in the future. In response, AMEX and other organizations developed SPY. The original ETF launched with $6.53 million in securities and, after initial difficulty persuading institutions to purchase the product, it soared to $1 billion in three years. The size of the global ETF market at the end of 2023, has exploded to $11.63 trillion in assets.

## Key SPDR ETF Examples: Diversifying Your Investment Portfolio

Investors can use SPDRs to diversify across specific market sectors. For example, the SPDR S&P Dividend ETF is an investment vehicle that seeks to provide investment results that track the total return performance of the S&P High Yield Dividend Aristocrats Index. This means that the SPDR S&P Dividend ETF indexes dividend-paying stocks that are a part of the S&P 500. The ETF is made up of a total of 136 companies and tracks performance through its NAV, which is communicated as a price per share.

However, this is not the only SPDR that an investor can use to realize a diversified investment in the S&P 500. Using another real-world example, investors can invest in SPDR S&P Regional Banking ETF, which is an investment vehicle that reflects the performance of companies within the S&P 500 that conduct business as regional banks or thrifts. Specifically, the ETF aims to match the total return of the S&P Regional Banks Index. The ETF is comprised of 140 companies in the S&P and also derives its value with its NAV, disseminated as a price per share.

## The Bottom Line

SPDR ETFs are funds that track the S&P 500, helping investors get broad exposure to the stock market and diversify their portfolios. They were created after the Black Monday crash in 1987 to offer a safer way to invest and reduce market risk. These ETFs can be traded like regular stocks, are highly liquid, and cover different sectors, which makes them a flexible investment option for investors. There are many types, like the SPDR S&P Dividend ETF and the SPDR S&P Regional Banking ETF, which suit different investment strategies. Since their start in 1993, SPDR ETFs have become an important part of the global ETF market, which is now worth trillions of dollars.  

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. "[SPY: The Idea That Spawned An Industry](https://www.sec.gov/Archives/edgar/data/1222333/000119312513023294/d473476dfwp.htm)."
>     
> 2.  ETFGI, LLP. "[ETFGI Reports that Assets Invested in the Global ETFs Industry Reached a New Milestone of US$11.63 Trillion at the End of 2023](https://etfgi.com/news/press-releases/2024/01/etfgi-reports-assets-invested-global-etfs-industry-reached-new)."
>     
> 3.  State Street Global Advisors. "[SPDR S&P Dividend ETF (SDY)](https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-sp-dividend-etf-sdy)."
>     
> 4.  State Street Global Advisors. "[SPDR S&P Regional Banking ETF (KRE)](https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-sp-regional-banking-etf-kre)."