ETF Investment – Which ETF, SPY Vs. SPYX Is Best?

If you’re new to investing in ETFs, this post by Marjolein at Radical Fire is great at explaining the difference between two major ETFs, SPY and SPYX. Tim

Investment strategies usually include portfolios that include asset classes that provide high yield and high dividends to its investors. As there are different managed funds available, how do you choose which one suits you best? Let’s discuss SPY vs. SPYX and which of the two ETFs is better.

Both SPY and SPYX are Exchange-Traded Funds (ETFs). The goal of the SPDR S&P 500 Trust ETF (SPY) is to get net returns that match the S&P 500 Index. The S&P 500 is one of the key benchmarks of the equity market in the United States. It’s used to measure the financial health and the stability of the economy. It is made of the 500 large and mid-capitalization stocks in the United States.

On the other hand, the goal of SPYX, also referred to as the SPDR S&P 500 Fossil Fuel Reserves Free ETF, is to remove the carbon footprint from the S&P 500. It’s a greener version of SPY, the first and biggest ETF issued. The goal of the ETF is to provide returns before expenses and fees that have the returns of the S&P 500 Fossil Fuel Index.

Typically, the ETF invests a minimum of 80% of its assets in securities that make the index. On top of that, it can invest in securities that aren’t included in the index, cash, money market portfolio, and cash equivalent. 

This ETF is part of a trend where companies’ asset allocation is geared towards investing in low carbon investments to lower their carbon footprint. It removes companies that emit carbon from its exposure, and this leaves SPYX with an energy exposure of 2.5% compared to SPY which has an exposure of 7%. 

Otherwise, both ETFs have an almost similar sector allocation and returns. In 99% of the instances, both funds have similar metrics.

SPY: SPDR S&P 500 ETF Trust

SPY or SPDR S&P 500 ETF Trust is the first index that copies the index while targeting a price of 10% of the S&P 500. Since its inception, it has been one of the most actively traded ETFs, even with the introduction of other S&P 500 ETFs.

Launched in 1993, SPY was the first fund to be listed in the exchange and had assets worth $6.53 million. Despite the difficult start, it finally rose to an AUM of $1 billion in 3 years. There are multiple platforms on which you can trade in SPY as listed in the NYSE ARCA Exchange

SPY index is a diversified large-capitalization US index that invests in companies across 11 sectors including energy, health care, financials, IT, and more.

SPYX: SPDR S&P 500 Fossil Fuel Reserves Free ETF

SPYX or SPDR S&P 500 Fossil Fuel Reserves Free ETF is a category of the S&P 500 index. Its goal is to diversify into energy-related firms. 

The fund launched in 2015 has a fossil-free stance that makes it tilted towards certain sectors. This means that they remove firms with fossil fuel reserves or crude oil, coal, or natural gas. 

At the same time, it provides good coverage of the US large-capitalization, small and mid-capitalization exposure. The index gets rebalanced after every quarter.

In the past, clean energy investing used to be limited to a small subsector of alternative stocks. It was more like a thematic investment that investors included in their core allocations. This increased their volatility as the majority of the companies in the clean energy space were smaller, and their track record is relatively shorter. 

For instance, one of the funds is the Solar Energy Index ETF (TAN) which is responsible for tracking solar companies of different sizes worldwide. It’s three times more volatile than SPY.

The goal of cleaning up the carbon exposure of the top indexes was started last year, with the United Nations Joint Staff Pension Fund putting a seed capital of $300 million. 

While the MSCI ACWI is quite a popular index, it’s considerably small compared to the S&P 500 index, which is tracked by three ETFs. While SPYX isn’t completely carbon-free, it has a smaller carbon footprint than SPY. This can be a good start for most investors who are green conscious.

SPY Vs. SPYX: Key Differences

One of the areas in which these two funds differ is the total assets under their management. This is important as it indicates if investors trust the fund. 

SPY is considered a large fund with an AUM of $430.34 billion. On the other hand, SPYX is a small fund with an AUM of $1.36 billion. Other key differences between the two funds are listed in the table below.

Inception date30th November 201522nd January 1993
Expense ratio0.20%0.09%
Net Assets$1.36 Billion$430.34 Billion
MarketUS stocksUS Stocks
CategoryLarge blendLarge blend

SPY Vs. SPYX: Composition Differences

Like we noted earlier, the S&P 500 consist of the 500 biggest companies in the stock market. However, not all companies are given similar weight in the funds. 

The top 5 holdings in SPY have the biggest market-cap in the US and the world. The 5 companies consist of 20% of the fund’s total assets. While the top 5 holdings consist of about 20% of the fund, they have different allocations even though they are relatively identical.

SPY has 507 holdings and allocates most of its holdings in different sectors.

  • Technology: 35.47%
  • Consumer cyclical: 14.78%
  • Financials: 13.45
  • Healthcare: 13.14%
  • Industrials: 8.76%
  • Consumer Non-cyclical: 5.59%
  • Utilities: 2.53%
  • Energy: 2.41%
  • Basic Materials: 2.37%
  • Telecommunication: 1.32%

The top ten holdings in SPY consist of 29.91% of the total assets. All the ETF funds are allocated into common stocks that are part of the S&P 500 Index.

Company% of Assets
Apple Inc.6.61%
Microsoft Corp.6.37% Inc.3.85%
Tesla Inc.2.26%
Alphabet Inc. Class A2.21%
Alphabet Inc. Class C2.08%
NVIDIA Corp.2.06%
Meta Platforms Inc. Class A1.90%
Berkshire Hathaway Inc. Class B1.33%
JPMorgan Chase & Co.1.24%

On the other hand, SPYX has 484 holdings. The top ten sectors that the ETF invests in are:

  • Technology: 36.20%
  • Consumer Cyclicals: 15.10%
  • Financials: 13.73%
  • Healthcare: 13.05%
  • Industrials: 8.95%
  • Consumer Non-cyclical: 5.70%
  • Utilities: 2.59%
  • Basic Materials: 2.43%
  • Telecommunications: 1.34%
  • Energy: 0.73%

About 30.60% of SPYX holdings are in the ETF top 10 assets. The holdings are:

Name% of Assets
Apple Inc.6.91%
Microsoft Corp.6.47% Inc.3.95%
Alphabet Inc. Class A2.28%
Tesla Inc. 2.19%
Alphabet Inc. Class C2.14%
NVIDIA Corp.2.08%
Meta Platforms Inc. Class A1.98%
Berkshire Hathaway Inc. Class B1.36%
JPMorgan Chase & Co.1.25%

SPY Vs. SPYX: Performance Differences

Here is a summary of the past performance of these two ETFs.

SPY Returns And Performance

YTD Returns26.48%
1-Month Return-2.43%
3-Month Return0.40%
1-Year Return25.41%
3-Year Return19.61%
5-Year Return17.73%
10-Year Return16.02%

SPYX Returns And Performance

YTD Returns25.61%
1-Month Return-0.16%
3-Month Return3.62%
1-Year Return28.04%
3-Year Return23.54%
5-Year Return18.56%
10-Year ReturnNA

SPY Vs. SPYX: Fees

The expense ratio of SPY is lower than that of SPYX (0.09 vs. 0.2%). Management fees should be part of your overall decision on which investment options will provide you with the best total return relative to its market price and fund management.

However, if making environmentally conscious investing decisions is important to you, you may decide that it’s okay to pay the higher fees. I have plenty of friends who love to pay the higher fee when it means they’re contributing to carbon-neutral investing.

SPY Vs. SPYX: Which Of The Two ETFs Is Better?

SPY is an efficient way of diversification from the exposure brought by the US equity market without investing in different stocks. This makes it a good choice for investors looking to include US equities to invest in their portfolio while absorbing a moderate risk level.

But on the other hand, it tracks 500 mid and large-cap companies. This means it has a wide range of risks such as country, market, economy, interest rate, and more. 

Investors need to understand the financial data which could affect the performance. This is where risk-adjusted decision-making comes into play. By understanding these exchange-traded products and the corresponding market conditions and market volatility that may affect your accumulating assets, many investors can make an informed and educated decision.

SPYX is suitable for investors who want to help achieve the UN sustainable development goals. The ETF provides physical exposure, and therefore, when you buy it, you will own all the underlying holdings. It is designed to measure the performance of companies in the S&P 500 Index that do not own fossil fuel reserves. Therefore, it’s an excellent choice for investors who are conscious of the environment.

So it all boils down to which asset value is aligned with your diversified portfolio. You already made a good investment strategy as you did due diligence on both commodities before investing. Any financial advisor or fund manager will tell you that you are on the right track. You just need to which actively managed ETF is within your risk tolerance and is aligned with your investment objective.

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Disclosure: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.

Tim Thomas has no positions in the stocks, ETFs, mutual funds, forex, or commodities mentioned.

This post originally appeared on Radical Fire and was syndicated by Tim Thomas / Timothy Thomas Limited.

Featured image credit: Unsplash.