SPY ETF Has Ruled For Decades, But Is It Still The Best Bet?

The SPDR S&P 500 ETF SPY has long been the go-to choice for investors wanting broad exposure to the U.S. stock market.

But as markets gyrate with fresh economic and geopolitical developments, and alternative ETFs gain traction, is SPY still the best bet for your portfolio? Let's break it down.

SPY — a passively managed ETF that aims to mirror the performance of the S&P 500 Index — boasts a massive asset base of over $619.47 billion. That makes it the largest ETF of its kind.

Large-cap companies are those with market capitalizations above $10 billion. They tend to be stable and generate consistent cash flows. This makes SPY a relatively less risky investment than mid- or small-cap ETFs.

As a blend ETF, it holds a mix of growth and value stocks, making it a balanced choice for investors looking for diversification.

Also Read: S&P 500 Correction ‘Overdue:’ Will The Market’s ‘Sideways’ Movement Turn Into A Tumble? ‘Focus On Balance And Diversification,’ Says Analyst

SPY’s underlying index, the S&P 500, is composed of the largest publicly traded U.S. companies. It spans 25-plus industries.

So far in 2025, SPY is down 1.04%, but it has gained 13.5% over the past year, as of March 6, 10.38 a.m. EST.

In terms of risk, SPY has a beta of 1, making it a medium-risk investment whose performance is at par with broader market movements.

SPY has its largest exposure to the Information Technology sector, which makes up around 30.10% of the portfolio. Financials and Healthcare are the next two largest sectors.

The fund’s top 10 holdings account for about 36% of total assets. Therefore, a significant portion of its performance is tied to these top holdings: Apple Inc. AAPL, 7.18%; Microsoft Corp MSFT, 6.01%; and Nvidia Corp NVDA, 5.8%.

Also Read: Vanguard’s VOO Set To Overtake SPY As World’s Largest ETF After Record January Inflows

SPY's Challenged Leadership

After holding the title of the world's largest ETF for 32 years, SPY briefly lost its crown mid-February to the Vanguard S&P 500 ETF VOO, according to ETF.com. While SPY has since reclaimed the top spot, analysts believe it may not hold onto it for much longer, given the growing momentum in other ETFs. Back in 2011, the SPDR Gold Trust GLD momentarily surpassed SPY. However, a better comparison with SPY will be VOO as it offers identical exposure to SPY but at a much lower cost, giving it a major competitive edge.

Some experts even suggest SPY could fall to third place behind iShares Core S&P 500 ETF IVV later this year if trends persist, according to a report by ETF.com.

Why Costs Matter

When choosing an ETF, cost is a crucial factor. The good news? SPY is an affordable option, with an annual expense ratio of just 0.09%. Over the long run, lower fees can make a big difference in your overall returns. The fund also offers a trailing 12-month dividend yield of 1.22%, adding a layer of income potential for investors. However, VOO and IVV both offer a similar strategy at a much lower expense ratio of 0.03%, which are driving some investors to them.

SPY has dominated the ETF market for decades, and its size and liquidity make it hard to ignore. But as investors become more cost-conscious, rivals like IVV and VOO are giving it stiff competition. If you prioritize liquidity and ease of trading, SPY remains a solid choice. However, if you’re focused on minimizing expenses, you might want to explore alternatives.

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