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Standard & Poor's Depositary Receipt (SPDR)

Categories: Finance,

When you buy SPDRs - pronounced spiders - you're buying shares in a unit investment trust (UIT) that owns a portfolio of stocks included in Standard & Poor's 500-stock index (s&p 500). a share is priced at about 1/10 the value of the s&p 500.Like an index mutual fund that tracks the s&p 500, SPDRs provide a way to diversify your investment portfolio without having to own shares in all the s&p 500 companies yourself. However, while the net asset value (NAV) of an index fund is set only once a day, at the end of trading, the price of SPDRs, which are listed on the american stock exchange (AMEX), changes throughout the day, reflecting the constant changes in the index. SPDRs, which are part of a category of investments known as exchange traded funds, can be sold short or bought on margin as stocks can.Each quarter you receive a distribution based on the dividends paid on the stocks in the underlying portfolio, after trust expenses are deducted. If you choose, you can reinvest those distributions to buy additional shares.