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SPY vs SPX: Everything you need to know

SPY and SPX are two symbols linked to the S&P 500 Index.

SPY is “the original” S&P 500 Index, offered by State Street Global Advisors, it was the first US ETF listed on a national stock exchange and remains one of the most traded ETFs in the world.

SPX is the S&P 500 Index used by many mutual funds and ETFs as a benchmark for their returns and portfolio diversification. While you can’t invest directly in SPX, you can invest in SPX options. 

In this post, we will detail the key differences between SPY and SPX. 

 

What is the S&P 500 Index?

Before we compare SPY and SPX, let’s first define the S&P 500 index.

In simple terms, the S&P 500 index is the index that tracks 500 of the largest publicly traded companies in the US. In this way, the S&P 500 is a US large-cap index.

This index includes both stocks listed on the NYSE and NASDAQ exchanges, and it represents about 80% of the value of the US stock market. It is widely used as a benchmark by US investors to define the health of the overall stock market and for investors to compare their performance to.

 

What is SPY?

The SPDR S&P 500 ETF Trust (SPY) is an exchange-traded fund offered by State Street Global Advisors, which tracks the S&P 500 Index. SPY was created in 1993. It is often referred to as the original S&P 500 ETF because it was the first US ETF traded on national exchanges and remains one of the most traded ETFs in the world today.

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What is SPX?

SPX is the S&P 500 Index that is used by many mutual funds and ETFs as a benchmark for their returns and portfolio diversification. 

SPX can’t be traded or purchased. Rather it’s a calculation that represents the level of the S&P 500 index. The S&P 500 index is maintained by S&P Dow Jones Indices, which is a division of S&P Global. While you can’t invest in SPX directly, you can invest in SPX options. 

 

SPY vs SPX

SPY is a mutual fund that uses the S&P 500 Index as a baseline for its performance and diversification. SPX is simply the numerical calculation that accompanies all the stocks inside the S&P 500. 

Simply put, SPY is the investment instrument, while SPX is the benchmark used to determine if the fund was able to generate similar returns as the S&P 500. 

 

SPX vs SPY: Diversification

The goal of SPY is to generate a similar portfolio to the S&P 500 Index (SPX). Its goal is to track and generate similar returns that SPX would generate if all of those companies were purchased and held in a portfolio. 

Below, we can see the industry distribution for SPY compared to the S&P 500 Index. 

IndustrySPYSPXDifference
Information Technology28.30%28.30%0.00%
Health Care12.99%12.99%0.00%
Financials12.77%12.77%0.00%
Consumer Discretionary10.65%10.65%0.00%
Communication Services8.70%8.70%0.00%
Industrials8.29%8.29%0.00%
Consumer Stables6.47%6.47%0.00%
Energy4.53%4.53%0.00%
Materials2.40%2.40%0.00%
Real Estate2.37%2.37%0.00%
Utilities2.50%2.50%0.00%
Multi Sector0.04%0.04%0.00%

 

From the table above, you can see that as of November 2, 2023, the portfolios are almost identical except for one small difference in the consumer services industry by 0.01%. 

From the table below, we can see the top 10 holdings of SPX and SPY as of November 2, 2023. We can see that there is a small difference of 0.01% in the top 3 holdings between SPX and SPY. 

SPX proportions tend to be slightly higher, while SPY proportions tend to be lower. While there are a bit more differences between SPX and SPY at the individual stock level, it’s marginal at only a 0.03% difference. 

 

CompanySPYSPXDifference
Apple Inc.7.20%7.21%-0.01%
Microsoft Corp.7.14%7.15%-0.01%
Amazon.com Inc.3.46%3.47%-0.01%
NVIDIA Corp2.97%2.97%0.00%
Alphabet Inc. A2.09%2.09%0.00%
Alphabet Inc Class C1.79%1.79%0.00%
Tesla Inc C1.67%1.67%0.00%
Meta Platforms Inc Class A1.91%1.91%0.00%
Berkshire Hathaway Inc Class B1.76%1.76%0.00%
UnitedHealth Group Inc1.37%1.37%0.00%
Total31.36%31.39%-0.03%

Overall, SPX does an exceptional job at creating a portfolio similar to SPX in an attempt to track and generate similar returns. 

 

SPX vs SPY:  Performance & Dividends

Another way to compare a mutual fund such as SPY is to see how well it performed in comparison to the benchmark index it is tracking, in this case, SPX. 

The table below shows the annual performance for both SPX and SPY. 

Total Returns by NAV
YearSPYSPXDifference
2022-18.17%-18.11%-0.06%
202128.75%28.71%0.04%
202018.37%18.40%-0.03%
201931.22%31.49%-0.27%
2018-4.56%-4.38%-0.18%
201721.70%21.83%-0.13%
201612.00%11.96%-0.04%
20151.25%1.38%-0.13%
201413.46%13.69%-0.23%

 

From the table above, we can see that SPY has performed similarly to the S&P 500 Index. That said, notice that SPY has underperformed SPX by an average of 0.15% in the last 9 years. The trends show that SPY slightly outperforms SPX pretty consistently. 

Overall, the difference in performance can be considered marginal, and SPY generated very similar results to the S&P 500 index. 

 

SPX vs SPY: Trading and Liquidity

SPY is an ETF that can be traded like most other financial instruments such as stocks and mutual funds. You can purchase shares in the ETF, hold them and trade them. If you hold them you can earn the dividend payments that the ETF generates. 

On the other hand, SPX does not issue shares and you can’t purchase directly. But, you can purchase SPX options. Rather than investing in an ETF and owning shares, you can trade SPX options to earn money. 

These are two very different investment strategies. Typically, active traders will trade options such as SPX in an effort to earn cash. While SPY allows investors to hold their shares to both build value and generate dividend payments. 

 

SPY vs SPX : Dividend Payments 

 

Since SPY is a ETF that you can own shares of, there is a potential to earn dividend payments if you own it. SPX, on the other hand, does not issue dividend payments.

 

SPX Options vs SPY Options

While SPY is an ETF that is backed by actual shares of stock in the companies that are listed on the S&P 500, the SPX is a theoretical index driven by the price of the S&P 500 itself. This means that it is not possible to buy directly into SPX, since there are no shares that could be bought and sold.

However, investors can choose to buy and sell SPX options, which function as bets on whether the price of the index will increase or decrease.

SPX options can be bought and sold on the open market, although investors will need to have an account with a brokerage that specializes in options trading. SPX options are available in multiple sizes and with daily, weekly, or monthly expiration dates.

SPX options are “European-style” which means that they can only be exercised on their expiration date. While this is a constraint on the investor, it does provide us with more time in which to make our trading decisions, since we are unable to exercise our options whenever market conditions feel right. This might be particularly appealing for individual investors, who may have limited time or tolerance to follow volatile markets on a daily basis. SPX options contracts are settled in cash on the expiration date – there simply aren’t any shares of stock available to trade hands.

As a general rule, most options contracts are American-style, particularly those involving equities, ETFs, or commodities. On the other hand, most European-style options contracts tend to involve indexes – SPX for the S&P 500 or other indexes like the Nasdaq 100 or Russell 2000. SPY options contracts are settled in shares – typically delivered to investors’ accounts on the day after they’ve exercised their options.

If we are more interested in accruing cash from our options trading, SPX options might be a better fit. If we are more interested in building and holding a portfolio of stock, SPY options might be a better choice. 

 

Conclusion

SPY is one of many S&P 500 index funds that give you exposure to the U.S. stock market using the S&P 500 are a benchmark. 

SPX is the S&P 500 index. The ticker symbol is a numerical calculation of all the stocks within the fund. While you can’t invest in SPX directly, you can invest in SPX options. 

SPY is a great investment option for investors looking to generate returns similar to the S&P 500. Over the long term, SPY generates consistent results that eliminate some of the annual stock market volatility. 

Day traders might be more interested in investing and trading options, therefore both SPY and SPX are great options that would follow similar trends since they are linked to one another.

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