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    A closer look at the SPY ETF

    18 Sep 2017

    Last time I described how ETFs track their underlying indices. I made my point using this chart that compares 10-year performance of the most liquid SPY ETF (red) and the underlying S&P 500 index (blue). They match perfectly. However when I zoom to 1-year performance, you can notice a discrepancy. As I explained last time, […]

    How do ETFs work?

    21 Aug 2017

    I described how ETFs are a convenient way to trade an index, for example the S&P 500. The question is, how good is ETF in tracking the underlying index? Well, it’s damn good! Take a look at the next chart which is comparing price of the S&P 500 index (blue, left axis) and the derived […]

    What is an ETF?

    5 Aug 2017

    My last article was about indices and how they can be useful as a performance gauge. However, their scope of use is much broader. Quite a lot of money is invested according to an index. This approach has acquired its own name: Index investing or Passive investing. Index itself is not tradeable. It’s just an […]

    What is an index?

    27 Jul 2017

    Index is a time serie describing change in value of some underlying assets. For example the widely known S&P 500 index tracks performance of the 500 largest US stocks. There are cap weighted indices where each stock in the index has a weight proportional to its market cap, sometimes adjusted for free float. Good example […]