The key to successful investing is finding the right investments for your goals and risk tolerance. Two of the most popular choices for everyday investors are the SPY and VOO exchange-traded funds (ETFs).
SPY is the SPDR S&P 500 ETF. It tracks the performance of the S&P 500 index and is one of the market’s largest and most actively traded ETFs.
VOO is the Vanguard S&P 500 ETF, which also tracks the S&P 500 index. It’s one of the most popular ETFs for buy-and-hold investors, and a common holding in robo-advisor portfolios.
SPY vs. Voo Summary:
- State Street’s SPY and Vanguard’s VOO are both solid ETFs from reputable companies.
- As market cap-weighted funds, SPY and VOO provide the same broad-based exposure to large U.S. companies.
- SPY has an expense ratio of .09%, while VOO has an expense ratio of .03%.
- SPY is one of the most actively traded ETFs and can provide greater liquidity for investors who are trading options.
- Liquidity isn’t a concern for buy-and-hold investors, so VOO is the better choice due to its significantly lower expense ratio.
SPY vs. VOO: The Slight Differences
SPY and VOO have very similar historical performance. For example, in the five-year chart below, their returns before fees were only .08% apart. That slight difference in returns primarily results from the fact that the funds don’t update their holdings at the exact same moment.
On a one-year time horizon (as shown below), SPY slightly outperformed VOO (.04%) before fees.
Look at the key data of these two ETFs and you’ll see that they vary only slightly, with the primary exception being the relatively high trading volume for SPY. Beyond that, the difference in yield is explained by SPY’s higher expense ratio.
|Average volume (10-day):||4,702,284||93,892,358|
|SEC yield (30-day):||1.63%||1.55%|
|Cash flow growth:||11.6||11.6|
|Book value growth:||7.9||7.9|
State Street Global Advisors vs. Vanguard
Both are large financial institutions with strong reputations.
State Street is one of the largest asset managers in the world, with $4.4 trillion in assets under management (AUM) as of December 2021. The company has been in business since 1978.
Vanguard has $7 trillion in assets under management as of December 2021. The company was founded in 1975 by Jack Bogle, who popularized the idea of index investing. Vanguard is a client-owned company, so its primary focus is on serving its clients/investors.
State Street focuses on providing asset management services to institutions. You can’t invest directly with State Street as an individual, but you can buy SPY shares on the open market.
Anyone can open a Vanguard account.
SPY vs. VOO FAQs
All online brokerages offer SPY and VOO, as they are ETFs listed on the New York Stock Exchange. Factors to consider when choosing a brokerage include fees, whether the brokerage offers IRAs, and whether it provides the ability to purchase fractional shares. For more information, see our guide to getting started investing. For smaller investors, see our guide to investing with little money.
SPY and VOO have the same volatility over time because they track the S&P 500 and use a market-cap-weighted strategy.
This means that the allocations for each stock in the portfolio are based on the stock’s market capitalization. For example, if Apple makes up 5% of the total market capitalization of the S&P 500, the fund allocates 5% to Apple shares.
In contrast, equal-weighted funds are allocated based on the number of shares in the index. For example, if Apple was one of 500 stocks in a given index, its weight would be 1/500th of the portfolio.
There’s no minimum investment for either ETF. However, some brokerages have minimum investment requirements, and some prevent you from buying fractional shares. Vanguard offers fractional share investing in its ETFs and therefore is a solid choice for those looking to invest in VOO.
The Bottom Line on SPY vs. VOO
So which one is the better choice: SPY or VOO?
For most investors, the answer is VOO.
VOO wins because of its slightly lower expense ratio. While .06% isn’t a big difference, it does add up over decades.
For example, someone who invests $500 per month for 40 years with an 8% annual return will see their portfolio grow to $1,565,201. Lower those average returns by .06% (the difference between the SPY and VOO expense ratios), and the result is a portfolio worth $1,540,612.
That’s a difference of almost $25,000.
If .06% makes that much difference, imagine how much you’re giving up when paying 1% in fees, which many investors do. That’s why we recommend checking your fees — including the often hidden fees within a 401(k) — by utilizing Personal Capital’s free fee analyzer.
If you’re investing within a 401(k) where VOO isn’t an option but SPY is, then you should recognize that SPY is still a very low-cost and low-risk way to invest in the market as a whole.
While it’s not the lowest expense ratio ETF out there, there are many index funds with an expense ratio above 0.20%. In other words, it’s not like you’re getting ripped off with SPY — it’s only slightly costlier than VOO.
For the rare investor who is looking to trade ETF options, consider SPY for its high trading volume, which can help with liquidity.