S&P 500 Index - "Spiders"?

Question

my broker is recommending me to put money into this. is this a good investment?
http://www.google.com/finance?q=SPY

would it be better to go with a managed fund?
thx

Answer 1

The spiders and other ETFs are one of the best investment products put on the market in years. Their advantages are almost endless and in addition to that they have very, very low fees. Think energy is going up, buy the XLE and own shares in all of the SP500 index energy stocks. One click of the mouse you can put a $100,000 in the market without a ripple. Think energy stocks are going down, short the XLE or buy puts and you are on the way to more profits. MUTUAL FUNDS BEWARE your days of big fat fees, front running stock trades and BMWs in every parking space are winding down.

Answer 2

Maybe, maybe not. Without knowing your objectives, risk tolerances and other holdings, there is no way to give a proper response.

I would wonder why you would buy the spdrs versus just investing in an index fund if the goal was to track the index. The internal expenses on the spdrs are low, but every buy or sell comes with a ticket charge, which can eat into your returns.

Most investors pick a fund, then add to it regularly, with a spdr, that can grow expensive quick (trade fees). It would make more sense to just use the Vanguard Index 500 fund which has ultra low expenses and no load at all. Of course then your broker doesn't make a dime.

Depending on what your broker is really doing for you, maybe he has earned a commission. I'm not judging that, but I do feel that if he had done his job, you wouldn't be on here asking this question. After all, he's getting paid to make the investment recommendations.

You may want to talk to another broker, or if you're a bigger investor ($10K or more) seek out a real financial planner or investment advisor (IAs usually have higher minimums though).

I'm a big fan of managed funds. To me an index fund is like buying everything at retail, and I like bargains, so I love value based funds like Davis New York Venture (the load version) and Selected American (the same fund but no load for investors who can invest themselves or with a fee only advisor).

I've owne NY Venture and Davis' financial fund for years and they've been great performers, even during the crummy market.

But..that's what I picked, and I know what I'm doing.

Ultimately WHICH fund is far less important than having the right asset allocation or mix. That's why knowing the rest of your information is so important.

Like I said, my only question with the spdrs is why go that way, instead a mutual fund? (incidentally, paying a load is not a bad thing IF you get the advice you paid for and it may be cheaper than the brokerage fees on spdrs).

Answer 3

Your broker is likely very correct ( without knowing so many specifics of your finances and goals). If you are anywhere near being a newbie to finance you must stay away from *managed* funds----many have loads ( front and back) and egregiously high fees and charges that make money for the fund but not for you. The most important thing you can do, of course, is quickly learn the basics of investing; however time is really required for this (years).

Answer 4

SPY is one of the most active stocks/EFT's in the entire market. I can't judge your brokers recommendation (without knowing the rest of your portfolio & goals). The broker has recommended a fine "core" product to anyones portfolio. It's not a high commision product (either). It looks (at first glance) to be a good idea.

BTW: Learn investing. The S&P 500 is a basic (minimul) product everyone should know.

Answer 5

More than 80% of mutual funds do not outperform the stock market index according to statistics, so yes you are better off investing in index funds such as SPY or QQQQ. If I was given a choice of mutual fund or index funds, I would invest in index funds.

Answer 6

SPDR's have done pretty well over time. It's kinda like putting your eggs in a bunch of baskets. Time has proven that even with periods of decline, the markets will continue to advance, so good for long term, but don't plan on retiring in a year or two if that is your goal.