VOO vs SPY: Side-by-Side ETF Comparison

Both VOO and SPY track the S&P 500 index, providing nearly identical exposure to the 500 largest U.S. companies. However: VOO offers a much lower expense ratio (0.03%) and is better for long-term investors. SPY provides unmatched trading liquidity and is ideal for short-term traders or institutions.

Table of Content

ETF Issuers & Investment Objective

VOO is managed by Vanguard, a pioneer of low-cost investing. Launched in 2010, VOO uses a full replication strategy to match the performance of the S&P 500 Index, holding each company in the same proportion as the index itself.

SPY, created in 1993 by State Street Global Advisors (SSGA), is the oldest and most liquid ETF in the world. It also tracks the S&P 500, but is structured as a unit investment trust (UIT), which slightly limits certain reinvestment behaviors and may result in small tax inefficiencies.

Despite identical benchmarks, these two funds differ slightly in structure, cost, and use case.

Annual & Cumulative Returns

Both VOO and SPY have delivered nearly identical historical performance — as expected for two ETFs tracking the same index.

VOO has a slight edge due to its lower expense ratio, which compounds over time.

Risk Metrics

Risk measures such as volatility and Sharpe ratio are almost indistinguishable between VOO and SPY.

VOO: Designed for long-term investors who can tolerate market swings.

SPY: Equally volatile, but trades more frequently with tighter spreads.

Explanation:

• Volatility measures how much the ETF's price fluctuates.
• Sharpe Ratio reflects return relative to risk — higher is better.

Dividend Yield & Growth

VOO edges out SPY on dividend yield due to slightly lower internal costs. Both ETFs distribute dividends quarterly from their underlying S&P 500 holdings.

Explanation:

• Dividend Yield = annual dividends ÷ share price.
• Frequency = the interval in which dividens are being payed out.

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 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.