You've probably heard of the S&P 500. It is the heartbeat of the American stock market, a collection of 500 of the largest, most influential companies in the United States. But when you actually go to buy into it, things get a little murky because of the sheer number of options. One name always rises to the top: State Street. Specifically, the State Street S&P 500 fund ecosystem, which includes the legendary SPY.
It’s actually kinda wild when you think about it. State Street Global Advisors (SSGA) basically invented the modern way we trade the market. Back in 1993, they launched the SPDR S&P 500 ETF Trust. People just call it "SPY." It was the first exchange-traded fund in the US. Before that, if you wanted to track the 500, you usually had to deal with traditional mutual funds that only priced once a day. SPY changed everything by letting people trade the entire index like a single stock, all day long.
What is the State Street S&P 500 fund anyway?
When people talk about this, they are usually referring to one of two things. First is the SPDR S&P 500 ETF Trust (SPY). The second is its younger, leaner sibling, the SPDR Portfolio S&P 500 ETF (SPLG). They both track the exact same index. They both hold Apple, Microsoft, Amazon, and Nvidia. But they serve very different masters.
SPY is the big dog. It has hundreds of billions of dollars in assets. Because it’s so massive, it’s incredibly "liquid." That’s just a fancy way of saying you can buy or sell millions of dollars' worth of it in a heartbeat without moving the price. Professional traders, hedge funds, and institutional desks love SPY for this reason. They don't care as much about the fee because they aren't holding it for thirty years; they're moving in and out.
Then there’s SPLG. Honestly, if you're a long-term investor just trying to build a retirement nest egg, this is probably the State Street S&P 500 fund you actually want. It was restructured a few years ago to compete with low-cost leaders like Vanguard and BlackRock. It’s cheap. Really cheap. We’re talking an expense ratio of around 0.02%.
The Index itself
The S&P 500 isn't just a list of the 500 biggest companies. It’s "market-cap weighted." This means the bigger the company, the more it affects the fund. If Apple has a bad day, the fund feels it. If a tiny company at the bottom of the list—number 498—goes bankrupt, you might not even notice the dip.
It is also "float-adjusted." This means the index only counts shares that are actually available to the public to trade. It excludes shares held by founders or governments that aren't hitting the open market. This makes the index a more accurate reflection of what investors can actually buy.
The Fee War and Why It Matters to You
For a long time, SPY sat there with an expense ratio of about 0.0945%. That doesn't sound like much. But in the world of index funds, it’s actually a bit pricey. Vanguard’s VOO and BlackRock’s IVV were undercutting them at 0.03%.
State Street realized they couldn't just lower the price on SPY. Why? Because SPY is structured as a Unit Investment Trust (UIT). It’s a bit of an old-school legal structure. It has some weird rules, like it can’t reinvest dividends internally, and it has an actual expiration date in the year 2114 (though that will likely be handled way before then).
Instead of messing with the flagship, they pivoted SPLG.
If you put $10,000 into a fund with a 0.09% fee versus a 0.02% fee, the difference is only a few bucks a year. But over thirty years? With compounding? That gap turns into thousands of dollars of your money staying in your pocket instead of the fund manager's.
Why Liquidity is the Secret Sauce
You might wonder why anyone still uses SPY if SPLG or VOO is cheaper. It’s the "spread."
When you buy a stock, there’s a "bid" (what buyers want to pay) and an "ask" (what sellers want). The gap between them is a hidden cost. For a massive State Street S&P 500 fund like SPY, that gap is basically a penny. If you are a pension fund moving $500 million, that tiny spread saves you way more money than a low expense ratio would.
For the rest of us buying 10 shares at a time? The spread doesn't matter as much as the annual fee.
The Companies Inside the Box
What are you actually buying? You're buying the American economy. Sorta.
Currently, the index is heavily dominated by Tech. Names like Microsoft, Nvidia, Apple, Alphabet (Google), and Meta make up a huge chunk of the total value. This is a point of contention for some experts. They argue the S&P 500 isn't diversified enough anymore because it’s so "top-heavy."
If Big Tech hits a wall, the State Street S&P 500 fund hits a wall.
But history shows that the index is self-healing. When companies fail or shrink, they get kicked out. When new giants emerge—like Tesla did a few years back—they get added. It is a biological organism that sheds its dead cells and grows new ones. You don't have to pick the winners; the index does it for you.
Performance Realities
Don't expect 20% every year. That’s a fantasy.
The historical average is closer to 10% before inflation. Some years it's up 30%. Some years it's down 20%. The trick isn't being smart; it's being patient. The "average" investor actually performs much worse than the S&P 500 because they panic-sell when things get scary and buy back in when things are expensive.
If you just held a State Street S&P 500 fund through the 2008 crash, the 2020 COVID crash, and the 2022 inflation spike, you'd be doing just fine today.
Comparing the State Street Options
Let's get practical.
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SPY (SPDR S&P 500 ETF Trust)
- Best for: Day traders, options traders, and institutional giants.
- Structure: Unit Investment Trust.
- The "Vibe": The original. The gold standard for volume.
SPLG (SPDR Portfolio S&P 500 ETF)
- Best for: Everyone else. Your IRA, your 401k, your "boring" brokerage account.
- Structure: Open-end fund (more modern).
- The "Vibe": The budget-friendly powerhouse.
There are also mutual fund versions of the State Street S&P 500 fund, often found in institutional retirement plans. These are the "SSGA S&P 500 Index" funds. They aren't traded on an exchange like a stock; they price once at the end of the day. If your employer offers this in a 401k, it’s usually an excellent, low-cost way to grow your money.
Common Misconceptions
One thing people get wrong: they think they own "the market."
You don't. You own the large-cap market. You aren't owning the small mom-and-pop tech startup or the mid-sized manufacturing plant in Ohio. For those, you'd need a "Total Stock Market" fund. However, the S&P 500 represents about 80% of the total value of the US stock market, so it’s a pretty good proxy.
Another myth is that you need a lot of money to start. You don't. With many brokers now offering fractional shares, you can buy $5 worth of a State Street S&P 500 fund.
Is it too late to buy?
People have been asking this since 1993. "The market is at an all-time high, should I wait?"
Here is the thing: the market is supposed to be at all-time highs. That’s the nature of growth and inflation. If you wait for a "dip," you might miss a 15% run-up only to buy in during a 5% "correction" that is still higher than today's price.
Experts like Jack Bogle (who started Vanguard) always preached that "time in the market beats timing the market." It’s a cliche because it’s true.
Actionable Steps for Your Portfolio
If you're looking to put money into a State Street S&P 500 fund, don't just click "buy" on the first ticker you see.
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Check your goals first. Are you trading? Go with SPY. Are you building long-term wealth? Go with SPLG. The difference in fees might seem microscopic, but over decades, it matters.
Next, look at your "overlap." If you already own a lot of individual tech stocks like Nvidia or Apple, buying an S&P 500 fund is going to double down on those positions. That might be what you want, or it might be a risk you didn't realize you were taking.
Finally, automate it. The real power of these funds is "Dollar Cost Averaging." Set up a recurring buy. Whether the market is up or down, just keep buying. Over time, you'll buy more shares when they are cheap and fewer when they are expensive.
Summary of Next Steps:
- Audit your current holdings to see if you already have S&P 500 exposure through a 401k or other mutual funds.
- Compare the expense ratios of your current funds against SPLG’s 0.02% to see if you’re overpaying for the same performance.
- Decide on a contribution schedule that allows you to ignore market volatility and focus on long-term share accumulation.
- Consult with a tax professional if you're moving large amounts of money out of an old fund into a State Street fund to avoid unexpected capital gains hits.
The State Street S&P 500 fund family remains a cornerstone of modern finance for a reason. It is simple, it is relatively cheap, and it puts the power of the world's most profitable companies in your hands. Use it wisely.