This year, the stock market has seen immense weakness after a relatively impressive 2021. Judging from the start, 2022 is likely to be a downbeat year for stocks. However, as we’ve seen in the past, some top ETFs have turned heads with their performance despite challenging macroeconomic conditions. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY), better known as SPY stock, is perhaps the most attractive ETF investment at this time. It has a remarkably low expense ratio and exposure to multiple bellwethers.
Investors were fretting over the U.S. Federal Reserve’s hawkish signals for months and the inevitable recently played out. On top of that, you have the escalating tensions in Ukraine, which has investors flocking to safe-haven investments. Hence, things aren’t looking too pretty for riskier propositions.
To gain exposure to the cream of the crop and get the lowest downside risk, SPY stock remains your best bet. Take it from the greatest investor of our times, Warren Buffet: “[F]or most people, the best thing to do is own the S&P 500 index fund.”
What Is The SPDR S&P 500 ETF Trust?
The SPDR S&P 500 ETF Trust is a fund that tracks the S&P 500 Index, including 500 mega-cap U.S. stocks. It is essentially an investment vehicle that produces virtually the same returns as the S&P 500 Index before expenses. For instance, the five-year returns for SPY stock and the S&P 500 are at roughly 87.5%.
These stocks represent the crème de la crème of the equity market and are selected by a committee that looks at their liquidity, market size, and other key metrics. It serves as an effective gauge of the financial health and prospects of the U.S. economy.
ETFs own securities in various companies and those investing them don’t own the fund’s underlying assets. SPY stock is one of the highest-volume trading investments on the U.S. equity markets, with an average volume of over 50 million shares.
Many of the top investors still believe that investments in ETFs offer the best opportunities for long-term growth. One of the biggest names in the investing world, John Bogle, has been a huge proponent of ETFs and how they eliminates multiple risks from the equation.
For instance, with SPY stock, investors can gain exposure to 500 juggernauts of the U.S. stock market, representing over 70% of total market capitalization.
The Resiliency Of The S&P 500
Since 1957, the S&P 500 has undergone several crashes, dips, and corrections. However, over time, we have seen that it has emphatically recovered from every one. Additionally, it has returned a healthy 10.5% return on average from 1957 through 2021.
The chart to the right shows how the SPY stock has weathered multiple storms over the years and has treaded higher. Naturally, with the S&P 500 containing the top companies globally, you’re more than likely to have positive long-term growth. These companies boast rock-solid fundamentals, impeccable long-term outlooks, and the ability to evolve.
Final Word on SPY Stock
Equity markets across the board have performed sluggishly since the beginning of the year. However, investing in an S&P 500-linked index like SPY stock offers strong upside potential and greater protection from downside risks.
During a downturn such as the current one, the S&P 500 is perhaps the cheapest and most convenient way to invest in the largest companies in the world which never cease to amaze. There are risks in the post-pandemic world, such as the current geopolitical situation, protectionist policies, and the potential impact of new Covid-19 variants. Despite the risks, SPY stock remains a buy, presenting the best the market has to offer.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines