Spiders
Spider (SPDR) is a short form name for a Standard & Poor's depository receipt, an exchange-traded fund (ETF) managed by State Street Global Advisors that tracks the Standard & Poor's 500 index (S&P 500). Each share of an SPDR contains a 10th of the S&P 500 index and trades at roughly a 10th of the dollar-value level of the S&P 500. SPDRs can also refer to the general group of ETFs to which the Standard & Poor's depositary receipt belongs.
Definition
An Index Fund is an investment fund designed to replicate the performance of a specific market index. The most common example is a fund that tracks the S&P 500 index. Index funds aim to achieve the same returns as their target index by holding the same portfolio of stocks.
Origin
The concept of index funds was first introduced by John Bogle in the 1970s. He founded the Vanguard Group and launched the first index mutual fund. Since then, index funds have become popular as an effective tool for investors to diversify risk and reduce costs.
Categories and Characteristics
Index funds are mainly divided into two categories: mutual funds and exchange-traded funds (ETFs). Mutual funds typically trade at the end of the trading day at net asset value, while ETFs can be bought and sold throughout the trading day like stocks. Characteristics of index funds include low management fees, high transparency, and risk diversification.
Specific Cases
1. SPDR S&P 500 ETF (SPY): Managed by State Street Global Advisors, it tracks the S&P 500 index. Each SPDR share represents one-tenth of the S&P 500 index, and its trading price is approximately one-tenth of the S&P 500 index.
2. Vanguard 500 Index Fund: Managed by Vanguard Group, it is one of the earliest index mutual funds, tracking the S&P 500 index and offering a low-cost investment option.
Common Questions
1. What are the fees for index funds? Index funds typically have low fees because they are passively managed and do not require frequent trading.
2. Do index funds have risks? While index funds diversify individual stock risk, they still face market risk, meaning the fund will decline if the overall market declines.
