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 is the company that 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 Three Fund Portfolio), who invented index funds.
State Street Global Advisors is the company behind 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 Holdings
Both VOO and SPY are S&P 500 ETFs therefore their holdings will be identical, however, the weight allocation doesn’t necessarily have to be.
Here are the weight differences between VOO and SPY for their Top 10 holdings.
|Symbol||Name||SPY Weight||VOO Wieghts|
|GOOGL||Alphabet Inc Class A||2.21%||2.37%|
|FB||Facebook Inc Class A||2.10%||2.27%|
|GOOG||Alphabet Inc Class C||2.08%||2.16%|
|BRK.B||Berkshire Hathaway Inc Class B||1.37%||1.41%|
|JPM||JPMorgan Chase & Co||1.31%||1.26%|
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.
Annualized return difference is incredibly small. VOO return is 15.86% annualized vs. 15.77% for SPY.
Note that the data goes back to 2010 because this is a far as VOO can go.
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.
VOO has slightly higher dividend yield because of its difference in allocations.
Note that looking back at history, it is not always the case that VOO had better dividend yield.
VOO vs. SPY Asset Flow
Both VOO and SPY have experienced strong asset growth with VOO growing faster compared to SPY in the last three years.
VOO’s 3Y Assets Under Management is faster at 71% compared to SPY’s 40%.
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: