Introduction
When it comes to S&P 500 ETF investing, the comparison between SPY vs VOO is crucial for long-term investors. These two popular ETFs offer exposure to the largest U.S. companies, but key differences in expense ratios, liquidity, and structure can significantly impact returns over time.
In this comprehensive analysis, we’ll dive deep into the SPY vs VOO debate, examining their performance, costs, and suitability for different investor types. Whether you’re an active trader or a passive, long-term investor, this guide will help you make an informed decision for your portfolio.
Key Differences at a Glance
| Feature | SPY | VOO |
|---|---|---|
| Expense Ratio | 0.09% | 0.03% |
| Structure | Unit Investment Trust (UIT) | Open-end fund |
| Inception Date | January 22, 1993 | September 7, 2010 |
| Assets Under Management (AUM) | $630 billion | $632 billion |
Note: Assets Under Management figures are as of February 18, 2025, as reported by Bloomberg.
Performance Comparison
As of February 2025, here are the latest performance figures for SPY and VOO:
- SPY 1-year return: 40.56%
- VOO 1-year return: 40.68%
These figures demonstrate the minimal difference in performance between the two ETFs over the short term.
Long-Term Performance
Over the past 10 years (as of October 2024):
- SPY annualized return: 13.41%
- VOO annualized return: 13.47%
These long-term performance figures show a slight edge for VOO, likely due to its lower expense ratio.
Recent Developments
According to a Bloomberg report on February 18, 2025, VOO has surpassed SPY as the world’s largest ETF by assets under management. VOO now holds approximately $632 billion in assets, while SPY holds $630 billion. This shift reflects the growing preference among long-term investors for lower-cost S&P 500 ETF options.
The key factor behind this change is the difference in total expense ratios. SPY’s total expense is 0.09%, which is three times higher than VOO’s 0.03%. This cost difference has led to a significant shift in investor preferences over time
Expense Ratio & Fees
VOO has a significantly lower expense ratio of 0.03%, compared to 0.0945% for SPY. While the difference may seem small, over long periods, these costs can compound and impact overall returns for long-term investing.
A cost comparison over 20 years shows that investing $100,000 in VOO instead of SPY could save over $2,000 in fees, highlighting the importance of expense ratios in S&P 500 ETF selection.
Liquidity & Trading Volume
SPY has much higher liquidity due to its long history and large trading volume. Investors who engage in frequent trading may find SPY preferable, as it generally has tighter bid-ask spreads.
- SPY: Higher liquidity, better suited for active traders.
- VOO: Lower liquidity but sufficient for most long-term investors.
Dividend & Tax Efficiency
Both SPY and VOO distribute dividends from the underlying S&P 500 stocks. However, due to SPY’s Unit Investment Trust (UIT) structure, it does not allow for reinvestment of dividends internally, making it slightly less tax-efficient than VOO.
- SPY: No internal dividend reinvestment.
- VOO: More tax-efficient with the ability to reinvest dividends, benefiting long-term investing strategies.
Who Should Invest in SPY vs VOO?
- Choose SPY if: You are an active trader who values high liquidity and tighter bid-ask spreads.
- Choose VOO if: You are a long-term investor who wants to minimize expense ratios and benefit from internal dividend reinvestment in your S&P 500 ETF investment.
Conclusions
Both SPY and VOO offer strong exposure to the S&P 500, but the right choice depends on your investment strategy and goals for long-term investing.
- For traders and those needing high liquidity, SPY remains the top choice among S&P 500 ETFs.
- For long-term investors looking to minimize fees and maximize compounding, VOO is the smarter choice.
By considering factors such as expense ratios, liquidity needs, and investment horizon, investors can make an informed decision for long-term portfolio growth in their S&P 500 ETF investments.
