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I've heard and read the abbreviation multiple times, but I am blank. Please 'splain a SPDR.
Thanks,
Popsicletoes
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I've heard and read the abbreviation multiple times, but I am blank. Please 'splain a SPDR.

S&P 500 Depository Receipts. Traded on the American Stock Exchange under the ticker SPY.

Actually, I think SPDR is a generic term and there are numerous ones for various indices, but the SPY is the one most people refer to when they use the term.

Similar to buying S&P 500 Index funds, but a slightly different beast. I'm not sure how it's classified legally (limited partnership, whatever), but basically it trades like a stock rather than being a mutual fund. The return for buying SPY should be almost identical to the return for buying VFINX (Vanguard S&P 500 Index Fund). I believe both entities have an expense ratio of 0.18%. The differences are:

1) With SPY, you can buy and sell when you want to. No need to wait for end of day price, as a mutual fund.

2) With SPY, you control when you realize capital gains. Although VFINX is very tax efficient, they still have to buy and sell some stock to balance the inflow/outflow of money from the fund. Consequently, you'll get some pass-thru capital gains. Not so when you buy SPY. No gain until you decide to sell.

3) When you buy & sell SPY, you have to pay your normal broker's commission. That's on top of the expenses in the SPDR. So it's slightly more expensive.

4) As a consequence, SPY is not a good vehicle for small purchases or small monthly additions. You should stick to VFINX for that.

Hope this helps. Also, I hope I got it right.

Bob H., aka Blues
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Not so when you buy SPY. No gain until you decide to sell.
'cept for the dividend payments.

Fox
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So is there an advantage to holding a position in SPY vs. a position in an S&P 500 mutual fund INSIDE a Roth IRA (assuming one would want such a position within a Roth)?

xraymd
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If you have a self directed Roth IRA at a brokerage house, you can do either. Sometimes the mutual funds you can own are limited by the broker. You can always buy SPY however. So compare costs and decide.

For most people, the differences of ownership will be insignificant--but transaction costs, loads, commissions--can make the difference.
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So is there an advantage to holding a position in SPY vs. a position in an S&P 500 mutual fund INSIDE a Roth IRA (assuming one would want such a position within a Roth)?

They are so similar that other issue will probably be the determining factor. For instance, you might have your Roth IRA at E*Trade, but they charge a hefty fee to buy Vanguard funds. In that case, SPY would be better. If you had your IRA at Vanguard, then VFINX would be the choice.

If both cost the same to buy, dividend reinvestment might be important. You can reinvest dividends in VFINX at no cost. At E*Trade you can't have SPY dividends reinvested, and each time you buy more, you pay the $14.95 commission.

arkayem
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You can reinvest dividends in VFINX at no cost.

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I believe that Vanguard charges $2.50 re-investment fee.
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My mistake. Vanguard charges a $2.50 monthly maintenance fee, not a re-investment fee. Sorry.
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