SPY vs VOO – Is there really a difference?

S&P 500 index is one of the most popular index. It tracks 500 of the largest publicly traded U.S. companies.

Warren Buffet is a heavy advocate of the S&P 500 index fund. You can check out this video of Warren Buffet again, reiterating on buying the S&P 500.

An Overview: SPY vs VOO

Vanguard S&P 500 ETF
Benchmark IndexS&P 500 IndexS&P 500 Index
Management StylePassivePassive
Expense Ratio0.0945%0.03%
AUM$334.8 B $177.9 B
Avg. Daily Vol (65 Days)70,544,6563,249,776
as of 23/01/2021
Source: investor.vanguard.com | www.ssga.com | finance.yahoo.com

There are 3 noticeable differences with these 2 S&P 500 ETFs:

  1. SPY’s expense ratio is at 0.0945% vs VOO’s 0.03%. For every $10,000 you invest, you are only paying $9.45 and $3 respectively each year in management expenses.
  2. SPY has a bigger AUM at $334.8B vs VOO at $177.9B.
  3. SPY has a heavier trading vol at 70,544,656 compared to VOO’s 3,249,776. This is approx 23x more than VOO. What this means is that, the bid/ask spread,for SPY will be narrower.

SPY vs VOO – Performance

1 Year3 Year5 year10 year
SPY (Market Value)18.23%13.94%15.03%13.72%
VOO (Market Value)18.40%14.14%15.19%13.84%
S&P 500 index 18.40%14.18%15.22%13.88%
as of 23/01/2021
Source: investor.vanguard.com | www.ssga.com

When we look at the annualized returns, both these ETFs perform very similar to the benchmark, with VOO performing slighter better.

Conclusion – Is there really a difference?

From the findings above, both funds perform very similar. This is no surprise as they both track the same index. So then, which one should you buy?

If you are buying for very long term investment, I would go with VOO, because of the lower expense ratio. This is how much you will be paying fees assuming you invest $100k at a 7% return every year for the next 20 years.

You will be paying double in fees for SPY compared to if you invested in VOO.

SPY vs VOO expense ratio

However, if you don’t plan on holding long term, and is looking to do more trading, then SPY might be a better choice because of the higher trading volume. When you are trading, every little bid/ask spread will translate into profit or losses for you. The expense ratio won’t make much difference to you in this scenario.

As always, remember that Past Performance is No Guarantee of Future Results.