Almost every ETF portfolio out there with some exposure to stocks will have a percentage allocated to the stock market. In many cases, that means S&P500. S&P500 is simply an index of 500 largest companies on stock exchanges in the United States. There are a few ETFs out there that track the index. Most popular are VOO and SPY. So which one should you pick for your portfolio? We will look at the breakdown of VOO vs. SPY, their performance, fees, dividends, and why one is better suited for your portfolio.
VOO vs. SPY. Companies behind each ETF.
Vanguard offers VOO. Vanguard is one of the biggest investment management companies in the world, with over $7.1 Trillion (with a T) under management. Founded by Jack Bogle (Bogleheads Portfolio), who invented index funds.
State Street Global Advisors offers SPY. Also, a massive investment manager with over $3.5 trillion in assets under management. What’s fascinating is that SPY is the first U.S ETF. Created in 1993, SPY was the first and still is the largest U.S ETF.
SPY is bigger than VOO. At the point of writing, SPY has $364B in assets under management (AUM), and VOO has $230B.
VOO vs. SPY Performance
Any difference in performance between the two ETFs will be negligible. This makes sense since they both track the same index. However, because of the way the two funds reconstruct the index and fees associated with that, performance will differ.
Since December 31, 2010, VOO has a CAGR (Compound Annual Growth Rate) of 14.54% vs. SPY 14.48%.
The reason we check from 2010 is that VOO was created in 2010, so we can’t go further than that.
VOO vs. SPY Fees
ETFs have fees that are associated with how much it costs to run the fund. These fees pay for the fund managers’ salaries and all the other costs associated with running an ETF. These fees are called Management Expense Ratio (MER)
VOO has an Expense Ratio of 0.03%
SPY has an Expense Ratio of 0.09%
That means you will gain 0.06% a year by owning VOO over SPY.
VOO vs. SPY Dividends
Like performance, because both funds hold almost identical assets, there shouldn’t be a massive difference between the dividends they earn.
However, VOO has an annual dividend yield of 1.38% vs. SPY 1.31%. So again, just by a little, VOO has a better dividend yield.
Both VOO and SPY are incredible, cost-effective ways to buy the S&P 500. Both ETFs are offered by large institutions with rich histories. Both ETFs do what they are supposed to do, so we are nitpicking here as we are picking one over the other.
Based on the slightly lower Expense Ratio, we would go with VOO. The difference is again negligible, but if your goal is to reduce overall portfolio cost, it makes sense to go with a cheaper option that delivers similar results.
Links to Fact Sheets: