SPDR ETF vs S&P500 index fund

CreditCardChris

I don't quite understand what the different is between these to. I get that one is an ETF that is freely traded through the day and the other is an index fund but isn't the SPDR meant to be leveraged? When I click on the ETF to place a deal on HL I don't see any options to leverage my position, not that I'm planning on buying I just want to check it out for curiosity.

A_T

I thought SPDR is the name of the company providing the ETF.

CreditCardChris

A_T said:

I thought SPDR is the name of the company providing the ETF.

Maybe it is but on the ETF is says leveraged, but on other ETFs under leverage it says n/a. So why is the SPDR ETF different?

LHW99

My understanding is that 'leverage' is something done, or not, by the co. running the ETF (or IT). It's not something you do yourself (unless you are borrowing to invest).

Alexland

State Street Global Advisors (SPDR) have 100+ ETFs available to UK investors so maybe you could post a link to the exact ETF and Fund you are considering?

CreditCardChris

Alexland said:

State Street Global Advisors (SPDR) have 100+ ETFs available to UK investors so maybe you could post a link to the exact ETF and Fund you are considering?

https://www.hl.co.uk/shares/shares-search-results/s/spdr-etfs-europe-i-s-and-p-500-usd

It says on the right "leverage 100%". So if I deposit £1000 and the leverage is 100%, does this mean I basically have £2000 invested, and if so where is my stop? I can't seem to set any of this on the deal tab on HL.

Thrugelmir

Think that you've misunderstood. The fund's aim is replicate the return on the index 100% (i.e. mirror) before fees. 
The leverage is provided by the issuance of shares. i.e. shareholders funds. 

CreditCardChris

Thrugelmir said:

Think that you've misunderstood. The fund's aim is replicate the return on the index 100% (i.e. mirror) before fees. 
The leverage is provided by the issuance of shares. i.e. shareholders funds. 

So whether I buy into the SPDR etf or a normal SPX500 index fund, the risk and returns are exactly the same for me personally?

bowlhead99

CreditCardChris said:

Thrugelmir said:

Think that you've misunderstood. The fund's aim is replicate the return on the index 100% (i.e. mirror) before fees. 
The leverage is provided by the issuance of shares. i.e. shareholders funds. 

So whether I buy into the SPDR etf or a normal SPX500 index fund, the risk and returns are exactly the same for me personally?

The returns should be roughly the same for that ETF as for other unleveraged ETFs and index funds which aim to track the S&P500. You can see from the tooltip on the link you gave (screenshot below), that they mean a '200% leverage' fund would provide 2x the return of the target index and so a 100% fund would only provide 1x the return (i.e. 100% of the money is coming from equity investors rather than from debt).

So as far as leverage and basic investment performance / volatility is concerned, the investment return will hopefully be basically the same between that ETF and (e.g.) HSBC's rival ETF with ticker 'HSPX'; they are both aiming to offering the full amount of the index return (without extra leverage) subject to their 0.09% OCF and transaction costs and tracking error etc and are holding about $4bn of investments in a portfolio of around 500 stocks.

The question on whether the 'risk' is *exactly* the same cannot really be answered with a yes - because State Street and HSBC are different organisations with their own unique counterparty risk, fraud risk etc,  and for example ETFs differ from OEICs in structure and in certain regulations (no FSCS protection on an ETF). We live in uncertain times. So people would not say 'the risk is exactly the same' between every competing product. and you can do your own research there. But from the perspective from which you're asking the question - am I getting 1x the risk and return of the index or 2x the risk and return of the index...?  - this SPDR ETF is offering just 1x.