VOO vs. SPY: Which S&P 500 ETF is The Better Bet? |

Comparing Vanguard S&P 500 ETF (VOO 0.10%) to State Street SPDR S&P 500 ETF Trust (SPY 0.12%) reveals two nearly identical portfolios where the primary distinctions are expense ratios and fund management structures.

Both funds serve as foundational building blocks for long-term investors by tracking the S&P 500 Index, which covers approximately 80% of U.S. market capitalization. While they hold the same basket of large-cap American companies, their costs and historical liquidity profiles differ slightly, making the Vanguard fund potentially more attractive for long-term buy-and-hold strategies, whereas the State Street trust remains a primary vehicle for high-volume institutional traders.

Snapshot (cost & size)

The Vanguard fund is more affordable for retail investors with an expense ratio of 0.03%, compared to 0.09% for the SPDR trust. While this 0.06 percentage point gap may seem negligible in the short term, it can compound over decades for investors with significant capital.

Performance & risk comparison

What’s inside

Vanguard S&P 500 ETF, launched in 2010, holds 505 stocks and aims to replicate the S&P 500 Index performance precisely. Its largest positions include Nvidia (NASDAQ:NVDA) at 7.84%, Apple (NASDAQ:AAPL) at 6.44%, and Microsoft (NASDAQ:MSFT) at 4.89%. The portfolio heavily favors the technology sector at 35.67%, followed by financial services at 11.64% and communication services at 11.25%. This fund is managed to minimize tracking error while providing broad exposure to the largest companies in the domestic market. Over the trailing 12 months, the fund has paid $7.13 per share in dividends.

The State Street SPDR S&P 500 ETF Trust launched in 1993, was the first exchange-traded fund listed in the United States and currently holds 503 positions. It maintains a similar sector tilt with technology at 39.05%, financial services at 11.07%, and communication services at 10.64%. Its top holdings include Nvidia at 7.98%, Apple at 6.96%, and Microsoft at 4.81%. The SPDR trust has paid $7.38 per share over the trailing 12 months. Because it is structured as a unit investment trust, it has slightly different rules for dividend reinvestment compared to the Vanguard fund.

Which fund is the better buy?

The S&P 500 Index is the most-tracked index by active and passively managed funds in the world. There are plenty of choices out there for gaining exposure to what, for most investors, is likely a core component of their portfolio.

The Vanguard and State Street offerings are two of the biggest and best choices for building a portfolio. They both offer rock bottom expenses, reflect the S&P 500 index close to flawlessly, and are large enough to be liquid to even the largest investor’s needs.

The winner here, however, is the Vanguard S&P 500 ETF for its lower expense ratio, which can be meaningful for investors over the long-term and at scale. You see the benefit of lower costs in the edge Vangaurd’s VOO has in every performance time frame. VOO beats SPY in year-to-date, one-year, three-year, five-year, and 10-year performance. Granted, the difference is just 0.06% over 10 years, at 15.61% for VOO and 15.54% for SPY, but that’s real money to investors.
Of course, not every investment decision can be made in a vacuum. If you only have access to SPY because of offerings in a retirement or other sponsored account, that’s ok: VOO and SPY come as close as any traded product can to replicating the performance of the S&P 500 Index.

For more guidance on ETF investing, check out the full guide at this link.