Introduction

As an investor, you may have been told never to place all your eggs in one basket. The simplest way you can follow this is by having a diversified portfolio. You can diversify your portfolio by investing in an exchange-traded fund (ETF). ETFs track the performance of a specific index and comprise stocks that make up the said index in a given proportion, which gives you access to mirror the performance of the index. From accessibility and liquidity to transparency and portfolio diversification, ETFs offer you numerous benefits. One type of ETF that is steadily gaining popularity is the Spider ETF.

SPDR ETF, colloquially known as the Spider ETF, is the most popular spider ETF tracking the S&P 500 index. Its popularity showcases the growing demand for global investing by Indian investors. To ensure these ETFs are an ideal fit for you, the first step is to learn about them. Keep reading to learn the meaning, benefits, and steps before investing in Spider ETFs.

​​​​​​​ Open Demat Account and Start Trading!

What is Spider ETF?

Standard & Poor’s Depositary Receipt (SPDR) ETFs are commonly referred to as Spider ETFs. These exchange-traded funds also focus on replicating the performance of a specific stock market index. What sets them apart from other ETFs is they track the performance of broad-market indexes such as the S&P 500. So, instead of selecting individual stocks, you gain access to a financial product mirroring all stocks present within that specific index. You can trade these passively managed ETFs just like shares on the stock market. The best part about Spider ETFs is you get exposure to global sectors and markets.

Benefits of Investing in Spider ETFs

By investing in Spider ETFs, you can gain the following benefits.

• Portfolio Diversification and Exposure

Spider ETFs offer you instant access to a diversified basket of stocks. This results in portfolio diversification and reduces the risk of a single company's underperformance. Apart from portfolio diversification, you get a chance to invest in the global financial markets.

• Liquidity and Transparency

Since you can trade ETFs like regular stocks on the stock markets, you can buy and sell them during market hours at prevailing prices. Spider ETFs also disclose all information about their underlying holdings and performance daily, adding to their transparency.

• Cost-Efficiency

You can manage Spider ETFs passively, so you pay less transaction and management fees compared to actively managed funds. ​​

• Potential for Dividends

Most SPDR ETFs consist of well-established companies, which increases your likelihood of getting dividend payments.

Considerations Before Investing in Spider ETFs

Consider the following before you begin investing in Spider ETFs.

• Since these ETFs are directly related to the performance of the indices they track, they are affected by market trends. Underperformance of a sector or index can affect your returns too.
• Consider currency conversion when you invest in Spider ETFs listed on global markets. If the Indian rupee weakens compared to the foreign currency, your returns will also reduce.
• SPDR ETFs strictly mimic an underlying index, making them rigid. This means you will not get any benefit from market trends or downturns due to the passive management style of these funds.

Steps to Invest in Spider ETFs

Follow these simple steps to start investing in Spider ETFs.

• Since Spider ETFs are listed on the US stock exchanges, you will need a demat account with a brokerage firm that has access to international markets.
• You need a clearly defined list of investment goals to ensure investing in Spider ETFs aligns with them.
• Before choosing a Spider ETF, carefully research the available options and compare their expense ratios, tracking indices, performance, and liquidity.
• Add funds to the brokerage account. Follow the conditions the Reserve Bank of India laid down as per the Liberalised Remittance Scheme for international investments.
• Once satisfied with the chosen Spider ETF, place an order for the quantity to be acquired.
• Regularly monitor the performance of the Spider ETFs to ensure it is in sync with your investment objectives.

Conclusion

Whether you want to gain access to global financial markets, hedge risks while focusing on growth, or want a diversified portfolio, consider Spider ETFs. Investing in Spider ETFs allows you to tap into the global financial markets through a single and cost-effective financial product. However, do the required research and consider your risk tolerance and investment objectives to ensure these ETFs fit your goals.

Financial Calculators: SWP Calculator | EMI Calculator | SIP Calculator | Compound Interest Calculator | CAGR Calculator | Sukanya Samriddhi Yojana Calculator | Retirement Calculator | Mutual Fund Returns Calculator | EPF Calculator | Inflation Calculator

Popular Stocks: ICICI Bank Share Price | HDFC Bank Share Price | CDSL Share Price | UPL Share Price | TCS Share Price | BHEL Share Price | Trident Share Price | IRFC Share Price | Adani Power Share Price​​​​