The Grant Street Office Where My Ego Died
I walked into a broker’s office on Grant Street in Pittsburgh with $8,000 and a plan I’d cooked up in my cubicle at a call center in Monroeville. I’d found three “hot” stocks on a Reddit forum at 2 AM. SPY? That boring index fund my uncle kept mentioning at Thanksgiving? No thanks. I wanted winners. Sixteen months later, in March 2020, I was staring at a statement showing I’d lost $1,200 in actual dollars while the fund had climbed 14% in the same period. I was eating ramen in my apartment on Forbes Avenue and the broker wouldn’t return my calls. The boring fund won. Again.
Here’s what nobody tells you when they sell you the dream of beating the market. The first U.S. ETF ever created — SPDR S&P 500 ETF Trust, ticker SPY, born in January 1993 — isn’t just some legacy product collecting dust. In 2026, it’s still the most traded ETF on Earth. State Street Global Advisors launched it as a tiny experiment. Today it holds over $780 billion. And yet retail investors like me keep thinking we can outsmart it with a few stock picks and a gut feeling.
January 1993: The Birth Nobody Celebrates
Most people can’t name the year the first ETF was invented. Ask around a Pittsburgh sports bar and you’ll get blank stares. It was January 22, 1993. The American Stock Exchange. A team at State Street figured out how to wrap the S&P 500 into a tradable share that behaved like a stock. The launch was so quiet that The Wall Street Journal barely covered it.
And yeah, I know what you’re thinking. “1993? That’s ancient.” But that’s the point. It survived the dot-com crash, the 2008 meltdown, the 2020 COVID panic, and the 2022 rate-hike slaughter. Every time, it climbed back. Not because it’s magic. Because it simply owns the 500 largest U.S. companies and rebalances quarterly. No genius stock picker required. No 2 AM Reddit research.
I didn’t know any of this in 2019. I thought the fund was what lazy people bought. The truth? Lazy people were the smart ones. I was the one paying $4.95 per trade at a discount broker, convinced that my “due diligence” — which consisted of reading two Seeking Alpha articles and a Twitter thread — would unlock superior returns.
Why SPY Still Beats Stock Pickers Like Me
The S&P 500 has historically returned about 10% annually before inflation. Sounds average, right? But here’s the brutal part. According to data from S&P Dow Jones Indices, most actively managed funds fail to beat the S&P 500 over any meaningful time horizon. In 2024 and 2025, the story didn’t change. Over 85% of large-cap fund managers underperformed the index over a 15-year window. Not because they’re stupid. Because picking winners consistently is nearly impossible.
I learned this the hard way. I bought a biotech name that looked “undervalued” at $34 per share. It dropped to $19. I bought a retail turnaround story in Ohio that filed for bankruptcy six months later. I bought a Chinese tech ADR because a guy on YouTube with a neon keyboard swore by it. Meanwhile, the index fund just kept chugging along, reinvesting dividends and replacing losers with winners every quarter.
The frustration isn’t that good stock pickers don’t exist. They do. The frustration is that I’m not one of them, and neither are most people who think they are. If you’re curious about how other financial decisions can quietly drain your wallet, I also wrote about the hidden costs lurking in antivirus software subscriptions — different product, same principle of fees you don’t notice until they pile up.
SPY’s UIT Structure: What Wall Street Doesn’t Explain
Here’s where it gets technical, but I’ll keep it short because I wish someone had explained it to me in plain English. The fund is structured as a Unit Investment Trust, or UIT. VOO and IVV — the two main rivals everyone mentions — are open-end funds. What’s the difference? In a UIT, it must hold exactly the same securities as the S&P 500 index in the exact same weightings. It can’t lend out shares to short sellers for extra income. It can’t reinvest dividends immediately. When a company pays a dividend, the fund holds the cash until the quarterly payout date.
That sounds like a disadvantage, and in some ways it is. The expense ratio is 0.0945%, which is more than triple VOO’s 0.03%. On a $100,000 investment, that’s a $64.50 difference per year. Over decades, that compounds. But Its UIT structure also means it tracks the index with almost religious precision. There’s no securities lending revenue creating tracking error. For pure index exposure, especially in taxable accounts, some advisors prefer the UIT’s straightforwardness.
Dividends, Options, and the Liquidity Edge
There’s another reason this fund dominates, and it has nothing to do with expense ratios. Liquidity. It trades more volume in a single day than most ETFs see in a month. The bid-ask spread is often just one penny. If you’re an options trader — and plenty of Pittsburgh retail traders are — Its options chain is the deepest and most liquid in the world. You can trade SPY options with tighter spreads and better fill prices than almost any other product.
But for buy-and-hold investors, the dividend reinvestment policy matters more than options. Because SPY is a UIT, it does not automatically reinvest dividends. The cash sits in the fund until the quarterly distribution. VOO and IVV, being open-end funds, can reinvest dividends immediately. Over long time horizons, that slight drag can matter. During my 2019 experiment, I didn’t even know this was a thing. I was too busy refreshing my brokerage app to see if my biotech pick had bounced.
I also didn’t realize that The fund’s massive size makes it a favorite for institutional hedging. When pension funds and insurance companies want quick S&P 500 exposure, they don’t buy VOO. They buy this tracker. That institutional demand creates a self-reinforcing liquidity loop that keeps spreads tight and prices efficient.
VOO and IVV: Cheaper, But Not Always Better
So why doesn’t everyone just buy VOO or IVV? They’re cheaper, right? Yes. For a pure long-term investor with a Vanguard or Fidelity account, VOO is probably the mathematically optimal choice. The 0.03% expense ratio and automatic dividend reinvestment will likely produce slightly higher compounded returns over 20 years. IVV from BlackRock is nearly identical. Both are excellent products.
But “cheaper” isn’t the same as “better” for everyone. If you trade actively, if you use options strategies, if you want the tightest possible spreads, or if you simply value the transparency of a UIT structure, this ETF has real advantages. The $64.50 annual fee difference on a $100,000 portfolio? For an active trader, that’s erased by one better fill on a large order. I learned this in 2021 when I tried selling a large position during the GameStop volatility. My broker filled the SPY order at the ask price instantly. A thinner ETF would have cost me another twenty basis points in slippage that day alone.
And honestly? I think the whole debate is overcomplicated by finance bros on Twitter. For most people, the difference between this fund and its cheaper rivals is less important than the difference between investing and not investing. If you’re paralyzed by a 0.06% expense ratio gap, you’re missing the forest for the trees. I lost $1,200 because I was trying to be clever. Any of these three funds would have saved me from myself.
If you’re dealing with financial security in other areas, my piece on how a Boston broker tried charging me $4,200 I didn’t owe covers another kind of financial trap — the kind that wears a suit and smiles while it empties your account.
Who Should Actually Own SPY in 2026?
After my $1,200 disaster, I finally did what I should have done in the first place. I opened a taxable brokerage account, set up automatic monthly purchases, and bought the ETF. Not because it’s perfect. Because it’s good enough, and good enough held consistently beats clever played occasionally. I still own it today. The position is up roughly 68% since my March 2020 restart. My biotech pick? Delisted.
Here’s who SPY makes sense for in 2026. Active traders who need deep liquidity and options chains. Investors who want pure S&P 500 exposure with virtually zero tracking error. People who value the UIT structure’s simplicity. Anyone who wants an ETF that has survived every market condition for over three decades. In March 2024, when the market dipped hard on inflation fears, I watched friends panic-sell individual stocks while my SPY position recovered within six weeks. That kind of resilience is why I stopped trying to outsmart it.
Here’s who should probably look at VOO or IVV instead. Ultra-long-term buy-and-hold investors who will never sell and don’t need options. Investors in tax-advantaged accounts where dividend reinvestment matters more than liquidity. People who want the absolute lowest possible expense ratio above all else.
And here’s who shouldn’t buy any of them. People who think they can time the market. People who get their stock tips from TikTok. People who check their portfolio five times a day and panic-sell on red days. I was all three. The $1,200 I lost wasn’t just money. It was tuition. The market doesn’t care about my feelings, my research, or my confidence. It just keeps climbing, slowly and steadily, for those patient enough to let it.
Frequently Asked Questions
SPY vs VOO for beginners?
VOO wins on cost alone for most beginners. The 0.03% expense ratio vs SPY’s 0.0945% adds up over decades. But if you plan to trade options or need maximum liquidity, SPY’s tighter spreads and deeper options chain matter more than the fee difference. For a Roth IRA you never touch, VOO is probably smarter. For a taxable account you might trade, SPY has advantages.
SPY dividend reinvestment automatic?
No. Because SPY is a Unit Investment Trust, it cannot reinvest dividends automatically inside the fund. Dividends accumulate as cash and pay out quarterly. You can set up a Dividend Reinvestment Plan, or DRIP, through most brokers, but it’s not automatic inside the fund itself like it is with VOO or IVV. That slight cash drag is one reason long-term buy-and-hold investors sometimes prefer the open-end alternatives.
Why SPY still leads in 2026?
It remains the most heavily traded ETF in the world, with unmatched liquidity and the deepest options market of any U.S. fund. Institutional investors use it for rapid S&P 500 exposure and hedging. That massive volume creates tight bid-ask spreads that benefit everyone from day traders to pension funds. Being first mattered in 1993. Being huge still matters today.
SPY expense ratio too high?
Compared to VOO and IVV, yes. At 0.0945%, it costs roughly three times more per year. On a $500,000 portfolio, that’s about $322 extra annually. But for active traders, one better fill on a large order can erase years of that fee difference. For pure buy-and-hold investors, the lower-cost rivals make more mathematical sense.
First ETF ever created?
It launched on January 22, 1993, on the American Stock Exchange. It was the first U.S.-listed exchange-traded fund. Before that, investors who wanted S&P 500 exposure bought index mutual funds with higher minimums and less trading flexibility. The ETF structure revolutionized retail investing by combining the diversification of a fund with the tradability of a stock. You can read more about the history on Wikipedia’s SPY article.
SPY good for retirement accounts?
It works, but VOO or IVV are generally better choices for retirement accounts because of lower fees and automatic dividend reinvestment. In a 401k or IRA where you won’t trade options or need daily liquidity, the extra cost of this fund provides no real benefit. Save the fee difference and let compounding do its job over 30 years. For data on global ETF growth trends, Statista’s ETF market outlook breaks down where the industry is heading.
