SPY vs VOO: Side-by-Side ETF Comparison

Which is better? Both SPY and VOO track the S&P 500, but VOO wins on cost (0.03% fee vs 0.095%) and long-term holding structure. SPY, however, offers unmatched liquidity and tighter spreads for traders.

Table of Content

ETF Issuers & Investment Objective

SPY is managed by State Street Global Advisors (SSGA) and was launched in 1993. It is the oldest and one of the most actively traded ETFs in the world. Its primary objective is to provide investment results that, before expenses, generally correspond to the price and yield performance of the S&P 500 Index, which represents large-cap U.S. equities.

VOO is issued by Vanguard, a firm known for its low-cost investment products. Launched in 2010, VOO also seeks to track the S&P 500 Index, holding each stock in the index in roughly the same proportion. It aims to offer a low-cost and tax-efficient way for investors to gain exposure to the top 500 U.S. companies.

Both ETFs have the same benchmark and similar portfolios, but differ in cost, structure, and trading characteristics.

Annual & Cumulative Returns

These return metrics show that SPY and VOO have delivered nearly identical performance over time. This is expected, as both funds track the same index (S&P 500). The slight outperformance of VOO over various timeframes is likely due to its lower expense ratio, which minimizes drag on returns over time.

Risk Metrics

Risk metrics such as volatility and Sharpe ratio are virtually the same between the two funds, reinforcing the fact that both ETFs mirror the same underlying index. Volatility represents the fluctuation in returns, while the Sharpe ratio helps compare returns relative to risk and both funds deliver similar risk-adjusted performance.

Explanation:

• Volatility reflects how much the price moves over time higher volatility means more frequent or larger price swings.
• Sharpe Ratio measures risk-adjusted returns: how much return you get for each unit of risk. Higher is better.

Dividend Yield & Growth

VOO has a slightly higher dividend yield compared to SPY, again likely due to lower internal costs. Both ETFs pay dividends quarterly and distribute the underlying S&P 500 dividends proportionally. Over time, this can contribute significantly to total returns, especially in tax-advantaged accounts.

Explanation:

• Dividend Yield is the percentage of the fund's current price that is paid out annually as dividends.

Fees & Liquidity

SPY is the oldest and most actively traded ETF in the world, offering unparalleled liquidity ideal for short-term traders. VOO, while less liquid, boasts a much lower expense ratio. For long-term investors, the lower cost of VOO compounds into better net returns over time, making it more attractive for buy-and-hold strategies.

Explanation:

• Expense Ratio is the annual fee taken by the fund manager, expressed as a % of your investment.
• Bid-Ask Spread is the difference between the buying and selling price. Smaller spreads mean lower transaction costs.

ETF Composition: Asset Classes

Both ETFs are almost entirely invested in U.S. equities, with negligible allocations to non-U.S. stocks or cash. This mirrors the S&P 500's structure a pure play on large-cap U.S. companies. Neither ETF holds bonds or alternative assets.

Regional Allocation

While technically U.S.-focused, both ETFs include exposure to global revenues through U.S.-based multinationals. Still, their direct allocation is nearly 100% North America appropriate for investors focused solely on U.S. market exposure.

Sector Weights

Technology dominates both portfolios, making them sensitive to the performance of mega-cap tech firms. The other sector weights are broadly similar, with minor differences in healthcare and cyclical sectors. These differences can slightly influence returns during sector rotations.

Top 10 Holdings

The top 10 holdings are nearly identical, comprising the largest U.S. tech and consumer firms. These companies make up over 40% of each ETF’s total assets, reinforcing their growth-oriented tilt.

Valuation & Growth Metrics

Valuation Ratios

Valuation metrics are nearly identical, reflecting shared holdings. Slight differences result from timing and internal mechanics (e.g., SPY’s structure as a UIT).

Explanation:

• P/E Ratio = Price divided by earnings. Indicates how expensive a fund is relative to profits.
• Price/Book = Price vs book value (assets minus liabilities).
• Price/Sales = Price relative to total revenue.
• Price/Cash Flow = Price relative to how much cash the companies generate.

Growth Expectations

Growth rates indicate strong expectations for earnings, sales, and book value across both ETFs. These numbers support a growth-tilted long-term thesis, driven by the strong fundamentals of the underlying companies.

Which ETF Fits Your Portfolio - SPY vs VOO?

SPY and VOO are both excellent ETFs, but they serve slightly different investors. VOO is optimal for long-term buy-and-hold investors due to lower costs. SPY is ideal for tactical traders or institutions that need massive liquidity and low trading slippage.