SPY (the S&P 500 exchange-traded fund, or ETF) owns shares in about 500 large US companies. On 1 October 2026, those shares were worth $817.6 billion. SPY itself trades on a US stock exchange, so a slice of it changes hands as easily as a share in Apple.
SPY is an exchange-traded fund (ETF). It was the first one listed in the US, in January 1993. Here is what an ETF is, what ETFs hold, how one trades and how its price stays close to the value of what it owns.
What is an ETF? An exchange-traded fund (ETF) is a fund whose shares trade on a stock exchange through the day, like a company's shares. Each ETF share is a slice of everything the fund owns, such as company shares, bonds or gold.
US ETFs held $13.4 trillion at the end of 2025, across 4,495 funds. About 80% of that money was in funds holding company shares.
Large securities dealers can hand an ETF a set of its holdings and get new ETF shares back. They can also do the reverse. When the ETF's price drifts from the value of its holdings, these swaps earn them a profit, while their trades pull the price back.
SPY's closing price was within 0.05% of the value of its holdings on 93% of trading days from January 2025 to October 2026.
What is an ETF?
The US Securities and Exchange Commission (SEC) describes an ETF as a pool of money that invests in shares, bonds, other assets or a mix of them. Each ETF share is part ownership of that pool and of the income it earns.
What sets an ETF apart is where you buy it. Its shares are listed on a stock exchange. You buy them from other investors, through an investment platform, at the market price of the moment. SPY's main market is NYSE Arca, an exchange run by the New York Stock Exchange (NYSE). Its core trading session runs from 9:30 a.m. to 4:00 p.m. New York time.
Most ETFs follow an index. That is a list of investments, with rules for how much of each to hold. SPY follows the S&P 500, an index of about 500 large US companies. Our guide to what an index fund is explains how such funds work. Index ETFs held $11.6 trillion of the $13.4 trillion in US ETFs at the end of 2025.
Source: Investment Company Institute, 2026 Fact Book (Table 11); YX Insights
Chart 1 uses yearly figures from the Investment Company Institute (ICI), the US fund industry body. US ETFs held $66 billion at the end of 2000. By the end of 2025 they held $13.4 trillion, across 4,495 funds. Funds holding company shares had 80% of that money. Bond funds had 17%. The last 3% sat in funds holding commodities, which are raw materials such as gold and oil, or a mix of shares and bonds.
The same kind of fund can hold very different things:
ETF | What it holds | Started | Yearly fee |
|---|---|---|---|
SPY | Shares in the 500 companies of the S&P 500 | January 1993 | 0.0945% |
TLT (the long-term US Treasury bond ETF) | US government bonds with more than 20 years left to run (47 bonds on 1 October 2026) | July 2002 | 0.15% |
GLD (the gold ETF) | Gold bars in vaults of JPMorgan Chase and HSBC in London and New York | November 2004 | 0.40% |
Source: State Street (SPY, GLD); iShares (TLT)
How is an ETF different from a mutual fund?
A mutual fund is the older kind of fund. You buy its shares from the fund and sell them back to it. It prices its shares once a day, after the US market closes, according to the SEC and Vanguard. That price is the net asset value (NAV): the value of everything the fund owns, minus what it owes, per share.
An ETF works out its NAV every business day too. But its shares also change hands on the exchange all day, at whatever price buyers and sellers agree. Most ETFs post their holdings on their websites every day, the SEC says.
We compare an S&P 500 mutual fund with an S&P 500 ETF, head to head, in Index Funds vs ETFs.
How does an ETF work? Creating and cancelling shares
Source: State Street (SPY NAV history); YX Insights
Chart 2 shows how many SPY shares existed on each trading day from 1 October 2025 to 1 October 2026. SPY calls its shares units. The number changed on 250 of 251 days. It started at 1,021.0 million. It fell to 989.8 million on 19 March 2026, then rose to 1,073.0 million on 20 August. It ended at 1,070.4 million.
The changes come from a few large securities dealers, called authorised participants. Normally, only they deal with the fund directly, the SEC says. For SPY, it works like this:
Creating: a dealer hands the fund a basket of the shares in the S&P 500, plus a small amount of cash. It gets new SPY shares back, in blocks of 50,000. It can then sell them on the exchange.
Cancelling: a dealer buys SPY shares on the exchange. It hands them back in blocks of 50,000 and gets the basket of company shares in return.
Every daily change in Chart 2 was a whole number of these blocks. The chart shows only the net change each day. The full flow is far larger. In its financial year to 30 September 2025, SPY created 1.67 billion shares. It cancelled 1.68 billion. Each figure is more than one and a half times the 1.01 billion SPY shares that existed on 30 September 2025.
How does an ETF's price stay close to its holdings?
An ETF has two prices. The market price is what buyers and sellers agree on the exchange. The NAV is the value of what the fund holds. When the market price is above the NAV, the ETF trades at a premium. When it is below, the ETF trades at a discount.
Creating and cancelling pulls the two back together. The SEC calls this arbitrage: profiting from a price gap between two markets. Say SPY shares trade above the value of the company shares inside them. A dealer can buy those company shares, swap them for new SPY shares and sell the SPY shares at the higher price. That extra selling pushes the price back down. When SPY trades below its value, the dealer does the reverse.
Source: State Street (SPY premium/discount history); YX Insights
Chart 3 shows how far SPY's price sat from its NAV at each day's close, from 2 January 2025 to 2 October 2026. The median gap, above or below, was 0.017%. On $10,000 of SPY, that is about $1.70. The gap was within 0.05% on 407 of 439 trading days, or 93%. The price closed above the NAV on 224 days and below it on 215. The widest gap was a discount of 0.47%, on 26 June 2026.
Are ETFs safe? What can go wrong
An ETF carries the risks of what it holds. The SEC notes that ETFs are not guaranteed or insured by any government agency. Four risks stand out:
The holdings can fall. SPY lost 33.7% from 19 February to 23 March 2020, with dividends counted. Dividends are the cash companies pay to their shareholders. TLT, the bond ETF in the table, lost 31.2% in 2022.
The price can drift from the NAV. For SPY the gap stayed small, but it was never exactly zero in Chart 3.
You pay a spread. Buyers pay the ask price, while sellers get the lower bid price. The gap between them is a cost. The SEC says ETFs with higher trading volume typically have smaller spreads. We explain bid, ask and spread in What Does a Market Maker Do?
Some ETFs are narrow. The SEC notes that some ETFs "may even track the performance of a single stock". Such a fund carries the risk of one company.
What to check before buying an ETF
The fund's own web page answers most questions:
What it holds. SPY's page lists every holding, updated daily.
The yearly fee. This is the expense ratio, taken from the fund's assets. It is 0.0945% for SPY and 0.40% for GLD.
The premium and discount history. The SEC says it is usually on the fund's website.
The bid-ask spread. SPY's page shows the median spread over 30 days. On 1 October 2026 it was below 0.005%. That is small, but it is still a cost.
Where the fund is based. Some ETFs are based in Ireland and listed in London. One London-listed S&P 500 ETF from iShares can be held in an Individual Savings Account (ISA), iShares says. Our guide to index funds covers it.
An ETF is a fund you buy and sell on a stock exchange, like a share. Large dealers create and cancel its shares in exchange for its holdings, which keeps its price close to the value inside. For SPY, that meant a gap within 0.05% on 93% of trading days since January 2025.
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