Summary:
- Expense ratios and fund structure can impact long-term returns for S&P 500 ETFs.
- Comparison between SPY and VOO shows differences in fees, assets under management, and structure.
- Investors should consider cost, liquidity, and subtle differences when choosing between these two ETFs.
In the world of S&P 500 ETFs, the SPDR S&P 500 ETF Trust (SPY 0.27%) and the Vanguard S&P 500 ETF (VOO 0.27%) are two giants that offer exposure to large-cap U.S. stocks. While both track the same index and deliver similar returns, there are key differences that investors should be aware of.
When comparing these two ETFs, the decision often comes down to cost, liquidity, and subtle differences in structure rather than performance or holdings. VOO stands out for its lower fees and higher assets under management compared to SPY, making it a more cost-effective option for fee-conscious investors.
In terms of cost and size, VOO has a lower expense ratio of 0.03% compared to SPY’s 0.09%, while both offer similar dividend yields. While income-focused investors may not see a significant difference between the two funds, those who prioritize lower fees may lean towards VOO for its cost-effectiveness.
In terms of performance and risk, both SPY and VOO have similar max drawdowns and growth over five years. VOO holds 504 stocks with top sector allocations in technology, financial services, and consumer cyclical sectors, mirroring the S&P 500 Index. Its top holdings include Nvidia, Apple, and Microsoft, providing diversified exposure to U.S. large-cap stocks.
Overall, while VOO and SPY are nearly identical in most aspects, the lower expense ratio of VOO may be a key selling point for many investors. With fees adding up over time, especially for those with large account balances, choosing the right ETF can make a significant impact on long-term returns. Investors should carefully consider cost, liquidity, and fund structure when deciding between these two S&P 500 ETFs.
