SPY ETF: 89.72% Gain in 5 Years Shows S&P 500 Power

The numbers speak for themselves: a $10,000 investment in the SPDR S&P 500 ETF (SPY) five years ago would have grown to $18,972 today, representing an 89.72% total return. This translates to an annualized gain of approximately 13.7%, significantly outpacing the historical average five-year annualized return of 10.4% that the S&P 500 has delivered since 1926. This performance occurred without requiring investors to possess stock-picking prowess or market-timing skills, highlighting the effectiveness of passive, broad-market investing strategies.

While this recent performance has been strong, historical context reveals both higher peaks and deeper valleys. The S&P 500’s best five-year stretch occurred during the late-1990s dot-com era (1995-1999), delivering a blistering 28.6% annualized return. Conversely, tougher periods like the Great Depression (1928-1932) saw annualized losses of -12.5%. Over a 150-year horizon, the S&P 500 has delivered average annualized returns of 9.4% with dividends reinvested, proving that patience pays off even through challenging market cycles that SPY captures without guesswork.

Launched in 1993 by State Street Global Advisors, the SPDR S&P 500 ETF (SPY) is one of the most popular exchange-traded funds globally. At its core, SPY seeks to mirror the performance of the S&P 500 Index, a benchmark comprising 500 of the largest U.S. companies across diverse sectors including technology, healthcare, finance, and consumer goods. Unlike mutual funds, SPY trades like a stock on the NYSE Arca exchange, offering intraday liquidity and low trading costs that appeal to both institutional and retail investors.

One of SPY’s most compelling features is its cost efficiency. With an expense ratio of just 0.0945%, it significantly undercuts most actively managed funds, ensuring that more investor returns stay in their pockets. The fund’s massive size—managing over $500 billion in assets—ensures high liquidity, tight bid-ask spreads, and minimal tracking error against its benchmark index. Regulated as a trust, SPY holds physical shares of the underlying S&P 500 stocks, reducing counterparty risk compared to derivatives-based funds and providing investors with genuine ownership in America’s economic engine.

SPY’s impressive returns are fueled by its concentrated exposure to the titans driving the U.S. economy. As of early October 2025, the top 10 holdings account for approximately 38.78% of the fund’s assets, showcasing significant concentration in innovative market leaders. NVIDIA Corporation (NVDA) tops the list at 7.96%, powering the AI revolution with its cutting-edge chips. Microsoft (MSFT) follows at 6.73%, dominating cloud computing and software markets, while Apple (AAPL) holds 6.61%, benefiting from its extensive ecosystem of devices and services.

Other key contributors include Amazon (AMZN) at 3.73%, leading e-commerce and logistics, with Alphabet (GOOGL) and Meta Platforms (META) rounding out major technology positions at around 2% each. Broadcom (AVGO) represents semiconductor strength at 2.05%, while Eli Lilly (LLY) provides pharmaceutical exposure at 1.58%. This dynamic mix, which adjusts quarterly to match the S&P 500 index, consistently captures growth sectors while balancing with established stalwarts like Berkshire Hathaway and JPMorgan Chase, creating a robust portfolio that reflects the evolving U.S. economy.

SPY’s fundamental appeal lies in its unparalleled diversification. By spreading risk across 500 companies, no single stock’s performance can significantly impact the overall portfolio. This diversification, combined with the S&P 500’s historical average annual returns of about 10% over decades—consistently outpacing inflation and most other asset classes—makes SPY an exceptionally reliable long-term investment vehicle. The fund embodies the investment wisdom that ‘time in the market beats timing the market,’ offering a ‘set it and forget it’ solution for conservative investors who prefer not to chase trends or panic-sell during market volatility.

For both beginners and seasoned investors, SPY provides instant diversification and exposure to America’s economic leaders without the hassle of managing individual stock positions. While past performance doesn’t guarantee future results, and SPY isn’t immune to market downturns, its blend of growth potential, stability, and simplicity remains unmatched for those building retirement portfolios or seeking steady long-term appreciation. For investors currently sidelined, starting with SPY today could position them to capture the next five-year windfall, continuing the tradition of rewarding patient, disciplined investing in the broad U.S. market.