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SPY is an ETF (electronically traded fund) that tracks the S&P (Standard & Poors) 500 index. It's commonly called an "index tracker". The S&P 500 is a capitalization weighted index of large US corporations, which simply means that the larger the company the greater its percentage contribution to the index. Components of the S&P 500 are chosen by a committee to provide a cross-section of the US economy. The index has existed far longer than the ETF. SPY is only one of a number of products that try to mimic the index and track its performance.

In essence, holding SPY is equivalent to holding a portfolio of all 500 of the bluest of the blue chips. Since you can't realistically assemble such a portfolio, the ETF builds one for everybody and then sells individual investors a tiny piece of that huge portfolio.

So, making a comparison to SPY is telling you if you beat the large cap average performance. It's a common benchmark, but not the only one that could be chosen.

For general questions, Investopedia is a good source.

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