SPY vs. VOO: The Ultimate Showdown of Two Heavyweight ETFs. Which One Deserves a Spot in Your Investment Portfolio?
Features | SPY | VOO |
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Issuer |
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Gross Expense Ratio |
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10 Year Returns |
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Total Assets |
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Average Daily Volume |
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How Are They Different?
While SPY and VOO both track the returns of the S&P 500, there are some key differences between these two funds.
Structure
The main difference between SPY and VOO is how the two funds are structured.
VOO is an ETF managed by Vanguard, which is known for its passive index-tracking investment approach. SPY is managed by State Street Global Advisors, and the fund is structured as a unit investment trust (UIT), which has certain tax advantages but can also result in tracking errors compared to its benchmark index.
Expense Ratio
The expense ratio is the annual fee charged by the fund to cover its operating expenses, such as management fees, administrative expenses, and other costs. It is expressed as a percentage of the fund’s assets under management.
As of this writing, the expense ratios for VOO and SPY are as follows:
- VOO Expense Ratio: 0.03%. This means that for every $10,000 invested in VOO, the annual management fee would be $3.
- SPY Expense Ratio: 0.09%. This means that for every $10,000 invested in SPY, the annual management fee would be $9.
So, VOO has a lower expense ratio than SPY, making it a more cost-effective option for investors who want to track the S&P 500 index. It’s not a huge difference, but it can lead to a substantial investment amount of investment profit you are leaving on the table over time.
However, it is important to note that the performance of VOO and SPY may differ due to differences in their tracking methodology and other factors, such as trading volume and liquidity.
Liquidity
Another key difference between VOO and SPY is liquidity. Liquidity is how much trading volume there is for a particular stock, ETF, or option.
SPY has historically had higher trading volumes and greater liquidity than VOO due to its longer history as the first ETF tracking the S&P 500 index.
As of this writing, the average daily trading volume for SPY is approximately 60 million shares, while the average daily trading volume for VOO is around 3.5 million shares. This means that there are more shares of SPY changing hands on the stock exchange each day, indicating greater liquidity for the fund
For your average investor, liquidity is not a huge concern. Still, if you are an active trader, it could impact your ability to easily buy and sell securities without impacting the price, which brings me to my next point…
Bid-Ask Spread
The bid/ask spread is the difference between the highest price a buyer is willing to pay for a security (the bid price) and the lowest price a seller is willing to accept for the same security (the asking price).
The bid/ask spread represents the cost of trading security and is expressed in terms of “pips” (percentage in point) or “cents” for stocks and ETFs.
The main driver behind ask/spread is liquidity. Because VOO has less liquidity(trading volume), the price between what someone will buy/sell VOO is much wider compared to SPY.
- The Bid/Ask is 20 basis points wide for VOO.
- The Bid/Ask for SPY is 6 basis points wide.
Again, this does not mean much for the buy-and-hold investor and can largely be ignored. However, active investors should always consider the bid/ask spread when trading securities, as it can impact the overall cost of the trade. It is recommended to use limit orders when trading to help ensure that the trade is executed at a desired price, rather than paying the spread.
Dividend Yield
Both VOO and SPY are ETFs that track the S&P 500 index, which is comprised of 500 large-cap US companies. As such, they both offer dividend yields based on the dividends paid by the underlying companies in the index.
As of this writing, the dividend yield for VOO is approximately 1.36%, while the dividend yield for SPY is approximately 1.35%. This means that for every $10,000 invested in VOO or SPY, investors can expect to receive an annual dividend payment of approximately $136 or $135, respectively.
- VOO Dividend Yield: 1.36%
- SPY Dividend Yield: 1.35%
The slight difference in dividend yield between VOO and SPY is likely due to differences in the fund’s holdings, such as differences in the timing and amount of dividends paid by individual companies in the index. However, overall, the dividend yields for both funds are relatively low compared to some other asset classes, such as high-yield bonds or dividend-paying stocks.
It is important to note that dividends are not guaranteed and can be affected by various factors, such as changes in company earnings, economic conditions, and government policies. As such, investors should not solely rely on dividends for income and should consider other factors, such as capital appreciation and diversification, when making investment decisions.
Returns
10-year returns show VOO outperformed SPY by .08%.
Not surprising given the fact that VOO has a lower expense ratio.
| Returns | VOO Vanguard S&P 500 ETF | SPY SPDR® S&P 500 ETF Trust |
|---|---|---|
| 1-Month | -2.98% | -2.95% |
| 3-Month | -3.88% | -3.81% |
| 5-Year | +15.14% | +15.08% |
| 10-Year | +14.55% | +14.47% |
How Are They The Same?
While there a several differences between SPY and VOO, there are also some similarities.
Tracking
SPY and VOO seek to track the performance of the Standard & Poor‘s 500 Index, which measures the investment return of large-capitalization stocks.
Both ETFs seek to achieve their investment objective by holding a portfolio of the common stocks included in the index, with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the index.
VOO and SPY are both designed to track returns, including dividends of the S&P 500, which is a composite of the 500 largest publicly traded companies by market capitalization. Both VOO and SPY Top 10 Holdings are the same companies with almost identical weighting with minor differences likely due to tracking error.
SPY and VOO Top 10 Holdings
| VOO | SPY |
|---|---|
| AAPL 6.9% MSFT 6.0% AMZN 3.6% GOOGL 2.2% GOOG 2.0% TSLA 1.9% NVDA 1.6% BRK.B 1.6% FB 1.3% UNH 1.2% | AAPL 6.9% MSFT 6.1% AMZN 3.6% GOOGL 2.2% GOOG 2.0% TSLA 1.9% NVDA 1.6% BRK.B 1.6% FB 1.3% UNH 1.2% |
Other S&P 500 ETFs
While VOO and SPY are the most popular S&P 500 funds, a handful of other companies also have S&P 500 Tracking Funds.
All 4 ETFs seek to track the performance of the Standard & Poor‘s 500 Index which measures the investment return of large-capitalization stocks, with very little difference.
The one outlier is SPLG. This index fund generally invests in substantially all, but at least 80%, of its total assets in the securities comprising the index, so you might see some discrepancies in returns and price compared to SPY and VOO.
| Feature | SPY SPDR® S&P 500 ETF Trust | VOO Vanguard S&P 500 ETF | IVV iShares Core S&P 500 ETF | SPLG SPDR® Portfolio S&P 500 ETF |
|---|---|---|---|---|
| Expense Ratio | 09% | .03% | .03% | .03% |
| Issuer | State Street Global Advisors | Vanguard | BlackRock | State Street Global Advisors |
| Average Market Cap | $207.1B | $207.4B | $207.1B | $207.2 |
| Inception Date | 01/22/1993 | 09/07/2010 | 05/15/2000 | 1/08/2005 |
| Sales Load? | No-load | No-load | No-load | No-load |
The Bottom Line
If you are a buy-and-hold investor, VOO is the better option.
If you want to become an investor, is critical to educate yourself about various investment options, and the benefits and drawbacks of each.
That said, VOO has a lower expense ratio, higher dividend yield, and slightly higher returns than SPY. But, if you are an active trader, specifically an options trader, SPY is the far superior option. The SPY ETF has far tighter bid/ask spreads in its ETF and underlying options market due to its much higher daily trading volume.
