SPY vs. FIGB: SPDR S&P 500 ETF Provides Equity-Based Growth, While Fidelity Bond ETF Offers a Higher Yield

The Fidelity Investment Grade Bond ETF(NYSEMKT:FIGB) offers a high-yield fixed-income alternative to the equity-heavy State Street SPDR S&P 500 ETF Trust(NYSEMKT:SPY), providing lower volatility and different risk exposure.

While SPY tracks the broad performance of the largest companies in the U.S. stock market, FIGB focuses on the high-grade debt market. These two funds serve different roles in a portfolio: one seeks capital appreciation, while the other prioritizes income and relative stability.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Investors pay a higher premium for active management or specialized bond exposure, as the Fidelity fund expense ratio is 0.27 percentage points higher than the SPDR trust. However, the Fidelity fund offers a significantly higher payout for income seekers.

Performance & risk comparison

What's inside

The Fidelity Investment Grade Bond ETF, launched in 2021, provides access to U.S. high-grade bond sectors. The portfolio primarily consists of investment-grade corporate bonds and U.S. Treasury securities, with 180 total holdings. The fund has a trailing-12-month dividend of $1.77 per share.

The State Street SPDR S&P 500 ETF Trust, launched in 1993, holds 504 positions across all major equity sectors. Its largest positions include Nvidia Corp(NASDAQ:NVDA) at 7.97%, Apple Inc(NASDAQ:AAPL) at 6.39%, and Microsoft Corp(NASDAQ:MSFT) at 5.16%. The technology sector accounts for 34% of the fund. It has paid $7.38 per share over the trailing 12 months, reflecting its focus on large-cap equity growth rather than heavy fixed-income distributions.

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Which looks like the better buy

Both the Fidelity Investment Grade Bond ETF (FIGB) and the State Street SPDR S&P 500 ETF Trust (SPY) are exchange-traded funds (ETFs) that investors should get to know. Here are some key takeaways for investors.

First, let’s take a look at SPY. This fund is one of the largest ETFs in the world, with over $720 billion in AUM. The fund tracks the S&P 500 benchmark and, consequently, its top holdings are mostly big tech stocks like Nvidia, Apple, and Microsoft. The fund charges a fairly low expense ratio of 0.09% and has a very modest dividend yield of 1.04%.

FIGB, by contrast, is a bond ETF. Its largest holdings are U.S. Treasury bonds, although the fund also holds a significant portion of mortgage-backed securities, corporate bonds, and cash. Since it is a fixed-income ETF, it has a much higher dividend yield of 4.10% compared to SPY. However, it also has a higher expense ratio of 0.36%, meaning investors will pay a higher fee annually.

In summary, these two funds differ significantly in their strategies. SPY is a core holding for many investors, though other index ETFs that also track the S&P 500 offer a lower expense ratio. FIGB, meanwhile, is a fixed-income ETF designed for income-oriented investors. Its solid dividend yield of 4.10% will help deliver steady cash payments to investors seeking income from their portfolios. Yet, its expense ratio of 0.36% might give extremely cost-conscious investors pause, as there are bond ETFs offering similar yield with lower fees. However, if choosing between only these two ETFs, growth-seeking investors will likely favor SPY, while income-oriented investors will likely favor FIGB.

Jake Lerch has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.