VOO vs SPY: Comparing the Top S&P 500 ETFs
Now that VOO has overtaken SPY as the largest ETF, we spotlight their key similarities and differences.
For investors looking to gain exposure to the S&P 500, two of the most popular ETFs on the market are the SPDR S&P 500 ETF Trust (SPY) and the Vanguard S&P 500 ETF (VOO). These funds track the same index, providing exposure to the 500 largest publicly traded U.S. companies, but these exchange-traded funds have some distinct differences.
Now that VOO has overtaken SPY as the largest ETF by measure of assets under management (AUM), it's a great time for investors to review their similarities and key differences.
SPY vs VOO: The Basics
SPY and VOO both passively track the performance of S&P 500 index, a market-cap-weighted index of the 500 of largest publicly traded U.S. companies, representing a broad measure of the U.S. stock market and overall economy.
SPDR S&P 500 ETF Trust (SPY)
Launched in 1993, SPY is the first U.S.-listed ETF. Managed by State Street Global Advisors, the $630 billion SPY is highly liquid, with some of the highest trading volumes and liquidity among ETFs. Its longstanding presence makes it a go-to for institutional and retail investors alike, and it's often used for quick market exposure or hedging due to its strong market liquidity.
Vanguard S&P 500 ETF (VOO)
Introduced in 2010, VOO is Vanguard’s answer to SPY, offering the same exposure to the S&P 500 but with lower expenses, which has made it an attractive option for buy-and-hold investors. VOO’s lower expense ratio and long-term orientation reflect Vanguard’s mission of making low-cost investments accessible to all investors. Low expenses are a key distinction that has helped to make VOO the largest ETF in the world with $632 billion in AUM.
SPY vs. VOO: The Similarities
Both SPY and VOO track the S&P 500 Index, meaning they hold the same 500 large-cap U.S. companies in approximately the same weightings. Both funds provide investors with broad market exposure to various sectors, including technology, healthcare, consumer discretionary, and financials. Due to this diversified exposure, they offer a relatively low-risk way to invest in the U.S. equity market, ideal for those looking to capture overall market returns without stock-picking.
SPY vs. VOO: The Differences
While the SPY and VOO ETFs both track the same index, there are several subtle differences, including their expenses, liquidity, and performance, that investors should understand before choosing between the two S&P 500 index funds:
Expense Ratios
SPY has an expense ratio of 0.09%, which, while low, is still higher than that of VOO,’s 0.03%, one of the lowest expense ratios for S&P 500 ETFs. This makes VOO more cost-effective for long-term investors, as expense ratio differences compound over time and impact returns.
Liquidity and Trading Volume
SPY is one of the most traded ETFs, with extremely high daily volumes. This liquidity is beneficial for investors seeking frequent trades, as it minimizes bid-ask spreads and allows for efficient entry and exit points.
VOO, while less liquid than SPY, still has substantial trading volume and liquidity that will meet the needs of most individual investors. However, it is less optimal for very high-frequency trading strategies compared to SPY.
Structure and Tax Efficiency
SPY is structured as a Unit Investment Trust (UIT), which restricts its ability to reinvest dividends directly into the fund. Instead, dividends are distributed to investors, which could impact the total returns over time.
VOO, structured as an open-ended fund, has the flexibility to reinvest dividends. This structure potentially adds to its tax efficiency and makes it more attractive for long-term investors who prioritize compound growth.
Performance and Tracking Error
SPY has a slight tracking error due to its higher expense ratio and its structure, meaning its performance can deviate very slightly from the S&P 500 index.
VOO tends to have slightly closer tracking accuracy to the S&P 500 due to its lower fees and tax-efficient structure. Over long periods, however, these minor performance differences can impact returns.
| Metric | SPDR S&P 500 ETF Trust (SPY) | Vanguard S&P 500 ETF (VOO) |
| Assets Under Management | $630.3B | $631.8B |
| Expense Ratio | 0.095% | 0.03% |
| 1-Yr Return | 23.62% | 23.75% |
| 3-Yr Return | 13.39% | 13.45% |
| 5-Yr Return | 14.28% | 14.31% |
| 10-Yr Return | 13.21% | 13.27% |
AUM data from Bloomberg as of Feb. 18, 2025. Expense and return data from etf.com as of Feb. 14.
Tip: For a deeper dive, use etf.com’s comparison tool: SPV vs. VOO
Bottom Line on SPY vs. VOO: Which is Best?
Both SPY and VOO are excellent options for gaining broad exposure to the U.S. stock market, but they cater to slightly different types of investors.
SPY is better suited for:
- Short-term or high-frequency traders who prioritize liquidity and easy access to quick trades.
- Investors who may use the ETF for hedging purposes due to its high trading volume.
VOO is better suited for:
- Long-term investors looking to minimize costs and maximize returns over time through lower expense ratios.
- Those who prefer automatic dividend reinvestment and a more tax-efficient structure.
Both funds are stable, reliable, and offer the benefits of S&P 500 exposure, making them foundational ETFs for almost any diversified portfolio.
