Which ETF has a lower expense ratio, VOO or SPY?

VOO has a lower expense ratio than SPY. SPY’s expense ratio is 0.945% annually, while VOO’s expense ratio is 0.03% annually. This makes VOO almost 3x cheaper than SPY — though both funds charge very low fees compared to other funds.

Which ETF is better for long-term investment, VOO or SPY?

Both VOO and SPY track the S&P 500 and could make a great long-term investment. But VOO has slightly outperformed SPY over the last few years, and has a lower expense ratio. Both funds can help investors grow a diversified investment portfolio.

How do VOO and SPY handle dividends?

VOO and SPY both handle dividends differently. For VOO, investors must own VOO shares before the ex-dividend date to receive dividends. For SPY, all dividends received from SPY holdings are held in a non-interest-bearing account until the time of payout and dividends are paid quarterly.

Can I hold both VOO and SPY in my investment portfolio?

Yes, you can invest in both SPY and VOO in your investment portfolio. Since both funds are nearly identical, you can typically choose one or the other. But some accounts—such as a workplace 401(k) account—may not offer both funds, so if you want to invest in the S&P 500 index, you can choose the fund that’s available to you.

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VOO vs. SPY: Which S&P 500 ETF Is Better?

September 11, 2024

7 min Read

Written by Daria Uhlig

Edited by Emily Gadd

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The S&P 500 is one of the primary U.S. stock market indexes and is a favored investment by both retail investors and financial advisors alike. In fact, no less than Warren Buffett, the oft-quoted billionaire CEO of Berkshire Hathaway, has repeatedly suggested that the best investment for most individuals is simply a low-cost index fund.

Quick Take: Should You Invest In Both VOO and SPY?

Investors are spoiled for choice when it comes to S&P 500 index funds, so it can take some work to figure out which one is the best one for you. Two of the most popular low-cost options are:

Vanguard S&P 500 ETF, or VOO
SPDR S&P 500 ETF Trust, or SPY

Unless each fund satisfies different investment goals for you, you probably won’t need both. For example, you might buy SPY if you want to trade actively, or even venture into day trading, because of its high volume. You might consider buying VOO to hold over the long term because of its lower expenses.

VOO vs. SPY: What’s the Difference?

SPY and VOO are both S&P 500 index ETFs, so they actually have more similarities than differences. They’re both large-cap funds that track the performance of the S&P 500 index. This means they both:

Have the same goals
Invest in the same types of securities
Use a passive management style

The funds’ holdings are also quite similar in terms of the specific stocks they invest in and the industries those stocks represent.

That said, the funds do have some differences. There are variations in holdings and weightings. This can result in small variations in performance. Here’s a look at the primary differences between VOO and SPY.

Type of Security

Both VOO and SPY are exchange-traded funds, meaning they can be bought and sold on the open market anytime the exchanges are open. This gives both of these securities more flexibility than S&P 500 mutual funds. Those types of funds can only be bought or sold once per day, after the market is closed.

ETFs also let you invest with less money compared to mutual funds. With an ETF, you can buy a single share at whatever the market price is at the time you make the trade, whether it’s $50 or $500. Mutual funds, on the other hand, often have a minimum investment consisting of a specific dollar amount, such as $1,000 or $3,000.

That said, VOO is also available as an Admiral Shares mutual fund under the ticker symbol FXAIX.

Issuer

As the name might suggest, the Vanguard S&P 500 ETF was created by the Vanguard Group of mutual funds. It is currently managed by the Vanguard Equity Index Group. The SPDR S&P 500 ETF is managed by State Street Global Advisors.

Among U.S. ETF providers, Vanguard and State Street are the second and third largest, respectively, behind BlackRock, according to ETF Database. However, Vanguard is twice as large, with $2.81 trillion in total assets under management compared to State Street’s $1.28 trillion.

Origination

The Vanguard S&P 500 ETF was created on Sept. 7, 2010. The SPDR S&P 500 ETF has a significant edge in seniority over VOO, with an inception date of Jan. 22, 1993. In fact, SPY was the very first exchange-traded fund to ever come into existence.

Composition

The objectives of both of these funds are to mirror the performance of the S&P 500 index. As such, both ETFs typically hold the identical securities that comprise the S&P 500. However, there are usually very slight discrepancies in the actual securities held in each fund.

For example, as of Nov. 3, 2023, State Street Global Advisors reported that SPY held 503 securities, the same as the S&P 500 index. Vanguard’s VOO held 505 securities around that time. As of Sept. 4, 2024, both funds now hold 504 stocks, while the S&P 500 index remains at 503 stocks.

Compositionally, the two funds are almost identical, but there are very small variances in their top 10 holdings as well.

VOO

Here are the reported top 10 holdings of VOO as of Sept. 4, 2024:

Apple, 6.89%
Microsoft, 6.70%
Nvidia, 6.20%
Amazon, 3.69%
Meta Platforms Inc. Class A, 2.24%
Alphabet Class A, 2.17%
Alphabet Class C, 1.82%
Berkshire Hathaway Class B, 1.71%
Broadcom Inc. , 1.51%
Tesla Inc., 1.39%

SPY

For SPY, here is how State Street Global Advisors reports its top 10 holdings as of Sept. 4, 2024:

Apple, 6.90%
Microsoft, 6.54%
Nvidia, 5.71%
Amazon, 3.47%
Meta Platforms Inc. Class A, 2.41%
Alphabet Class A, 1.99%
Berkshire Hathaway Class B, 1.86%
Alphabet Class C, 1.67%
Eli Lilly and Company, 1.64
Broadcom Inc. , 1.43%

Although these lists of top 10 holdings are almost identical — even down to the funds investing in both Class A (GOOGL) and Class C (GOOG) shares of Alphabet stock — there are minor differences. The top 10 holdings comprise 34.32% of VOO’s portfolio, while SPY’s top 10 are a slightly lower 33.62%. Plus, Eli Lilly and Company is part of SPY’s top 10 holdings, while Tesla is in VOO’s top 10 holdings.

Fees

Fees are one of the main differentiating features between VOO and SPY, as they have identical investment objectives and nearly identical portfolios. While SPY has an annual expense ratio of 0.0945%, VOO’s is just 0.03%.

Although both are relatively small expense ratios in the world of ETFs, SPY’s is more than three times the amount of VOO’s.

Performance

When it comes right down to it, probably the most important single factor when it comes to choosing the right S&P 500 fund is performance. The performance records of VOO and SPY are remarkably similar in terms of recent performance and three-, five- and 10-year returns.

Performance	SPY	VOO
2024 YTD performance	16.61%	16.98%
1-year average annual return (market price)	22.01%	27.10%
3-year average annual return (market price)	9.47%	9.34%
5-year average annual return (market price)	14.84%	15.87%
10-year average annual return (market price)	13.01%	12.94%

Performance data is accurate as of Sept. 4, 2024.

Yield

The 30-day SEC yield is a metric developed by the Securities and Exchange Commission to provide an apples-to-apples comparison of bond funds. The calculation is based on the 30-day period ending on the last day of the previous month, according to Morningstar. It is calculated by dividing the net investment income per share earned during that period by the highest offering price per share on the last day of the period. The resulting yield represents investors’ dividend and interest earnings after expenses.

VOO has a 30-day SEC yield of 1.26% as of Sept. 4, vs. SPY’s yield of 1.19% as of Sept. 4. This compares with the current yield of the S&P 500 index itself of 1.32%.

Net Assets

Although SPY has been in existence for 17 more years than VOO, the latter fund has far more investor assets. As of Sept. 3, SPY had assets of $551.57 billion, vs. the $1.2 trillion VOO had as of July 31. The low expense ratio is one benefit of a large fund like VOO, which can take advantage of economies of scale.

Market Price

Both ETFs have similar market prices. As of Sept. 3, SPY was trading at $552.08, whereas VOO was $507.56. If you purchase fractional shares, the price difference might not matter. If you prefer whole shares or your trading platform only offers whole shares, VOO has the advantage of being less expensive.

SPY’s net asset value is currently trading at a premium of $0.08. VOO has a premium of $0.17.

Volume

Volume is the number of shares trading. SPY’s volume was 12,799,766 on Sept. 3. VOO’s volume was 3,570,005 as of Sept 4. While SPY is the smaller fund by far, its high trade volume could indicate higher liquidity — the ease with which you can buy and sell shares. That could make it a better choice for active traders.

Final Take To GO: Which Is a Better Investment?

S&P 500 index funds are generally considered to be good long-term investments for those who seek growth and can handle some day-to-day and year-to-year volatility. Unfortunately, investors can’t directly buy the S&P 500 index, so they’ll have to choose some type of proxy investment.

There are plenty of traditional open-end and more modern exchange-traded funds that track the performance of the S&P 500, and VOO and SPY are two of the most popular. But seeing as both can typically be bought and sold for zero commission on a public exchange, the main distinction between the two comes down to SPY’s higher expense ratio and VOO’s slightly superior long-term performance.

For most investors, the scales tilt toward VOO in the heads-up battle with SPY because of the lower expenses, even though the latter is the grandparent of the entire ETF industry.

Jacob Wade contributed to the reporting of this article.

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