The Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF Belief (SPY) are two of the preferred massive cap change traded funds (ETFs) within the funding business. Each are generally present in professionally managed portfolios, together with each conventional human-guided portfolios and people of robo-advisors.

However is one fund higher than the opposite? In spite of everything, each observe the S&P 500 Index, so you’ll be able to’t go flawed with both. However that’s what we’re going to look at on this VOO vs. SPY evaluation.

Spoiler alert: these two funds line up about as carefully as two competing ETFs presumably can. The variations between them are very slight and will solely marginally favor both in numerous classes.

What are VOO and SPY?

Each the VOO and the SPY are index funds that observe the S&P 500 Index (SPX). As index funds, every is a passive fund. Which means it really works solely to match the efficiency of the underlying index. No try is made to actively buying and selling shares throughout the fund in an effort to outperform the market.

This passive high quality means each funds have very low expense ratios, as a result of rarity of buying and selling exercise. Neither fund will both outperform or underperform the index.

In the meantime, the S&P 500 Index represents the five hundred or so largest publicly traded firms in the US. Which means it’s primarily a big cap inventory fund. And since it’s, the businesses included within the index are usually among the most dynamic and modern of their respective fields. Most in truth, are family names.

The S&P 500 Index is a market-weighted index. As a result of it’s, every firm held within the index is represented by one thing apart from a 1/500 share of general holdings. As a substitute, an organization’s illustration throughout the index is predicated on the full market worth of its excellent inventory. Which means an organization with $100 billion in market capitalization will occupy an even bigger house within the index than one with $20 billion in capitalization.

The VOO and SPY, as index funds primarily based on the S&P 500, make use of the identical follow.

The S&P 500 is a cornerstone holding in most portfolios. That’s as a result of the index is taken into account to be probably the most correct barometer of the general inventory market. Funds tied to the S&P 500 are generally present in professionally managed funding accounts. VOO and SPY are among the many hottest of these funds.

An Introduction to VOO

Because the title implies, the Vanguard S&P 500 ETF is a part of the Vanguard Group. With greater than $7 trillion in whole belongings underneath administration, Vanguard is the most important issuer of mutual funds on the planet, and the second largest supplier of change traded funds (ETFs).

Primary details and statistics concerning the VOO are as follows:

• Index it tracks: S&P 500 Index
• Variety of shares: 503
• Date launched: September 7, 2010
• Whole belongings: $748.1 billion
• Market worth: $374.52 (Nov. 30, 2022)
• 52-week excessive/low: $439.25 / $327.68
• Expense ratio: 0.03%
• Final quarterly dividend: $1.46920 (paid 10/03/2022)
• Dividend yield: 1.63%
• Dividend frequency: Quarterly
• Minimal funding: $1

As a big cap fund, the VOO doesn’t embody small- and mid-cap shares that always present the best long-term development potential. And neither the fund nor the S&P 500 Index supply any publicity to worldwide corporations.

Holdings:

There are 503 corporations held within the VOO, with a mean market capitalization of $147.0 billion. The typical earnings development charge is nineteen.6%, and the price-earnings ratio is nineteen.5 instances earnings. Return on fairness is reported at 22.3%.

Listed here are the highest ten holdings within the VOO, together with the share of the fund every represents (as of October 31, 2022):

• Apple (APPL) – 7.05%
• Microsoft Corp (MSFT) – 5.27%
• Amazon.com Inc (AMZN) – 2.76%
• Tesla (TSLA) – 1.84%
• Alphabet Inc. Class A (GOOGL) – 1.72%
• Berkshire Hathaway Inc. Class B (BRK.B) – 1.62%
• UnitedHealth Group Inc. (UNH) – 1.58%
• Alphabet Inc Class C (GOOG) – 1.54%
• Exxon Cellular Corp. (XOM) – 1.40%
• Johnson & Johnson (JNJ) – 1.39%

Sectors:

In line with the S&P 500 index, the VOO is comprised of 11 completely different business sectors, which collectively characterize 100% of the fund’s holdings.

Under are the 11 sectors throughout the VOO, with the share of the fund every represents:

• Data Know-how – 26.3%
• Well being Care – 15.3%
• Financials – 11.4%
• Client Discretionary – 10.9%
• Industrials – 8.3%
• Client Staples – 6.9%
• Power – 5.4%
• Utilities – 3.0%
• Actual Property – 2.6%
• Supplies – 2.5%

>>Associated: QQQ vs VOO – Which is the Higher ETF?

An Introduction to SPY

The SPDR S&P 500 ETF Belief is sponsored by State Road World Advisors Belief Firm (SSGA), and just like the VOO, the fund tracks the S&P 500 Index.

Primary details and statistics concerning the SPY are as follows:

• Index it tracks: S&P 500 Index
• Variety of shares: 503
• Date launched: January 22, 1993
• Whole belongings: $375.15 billion
• Market worth: $395.34 (Nov. 29, 2022)
• 52-week excessive/low: $479.98 / $348.11
• Expense ratio: 0.0945%
• Final quarterly dividend: $1.596 (paid 10/31/2022)
• Dividend yield: 1.54%
• Dividend frequency: Quarterly
• Minimal funding: $1

Identical to the VOO, the SPY holds solely large-cap shares. It gives no publicity to small- and mid-cap shares, or worldwide shares.

Holdings:

Matching the S&P 500 Index, the SPY additionally holds inventory in 503 large-cap corporations with a weighted common market capitalization of $444.9 billion. The typical earnings development charge is nineteen.6%, and the price-earnings ratio is 17.36 instances earnings.

Listed here are the highest ten holdings within the SPY, together with the share of the fund every represents (as of November 29, 2022):

• Apple (APPL) – 6.41%
• Microsoft Corp (MSFT) – 5.38%
• Amazon.com Inc (AMZN) – 2.46%
• Alphabet Inc. Class A (GOOGL) – 1.71%
• Berkshire Hathaway Inc. Class B (BRK.B) – 1.71%
• Alphabet Inc Class C (GOOG) – 1.54%
• UnitedHealth Group Inc. (UNH) – 1.48%
• Tesla (TSLA) – 1.45%
• Johnson & Johnson (JNJ) – 1.39%
• Exxon Cellular Corp. (XOM) – 1.38%

Word that each the order of the highest 10 holdings and the p.c of the fund every represents is barely completely different than that of the VOO. That is the timing distinction, owing to the truth that VOO holdings knowledge is offered as of October 31, whereas the lineup of the SPY is revealed as of November 29.

Sectors:

Identical to the VOO, the sectors held within the SPY are similar to the S&P 500 index. The SPY is comprised of 11 completely different business sectors, which collectively characterize 100% of the fund’s holdings.

Under are the 11 sectors throughout the SPY, with the share of the fund every represents (as of November 29, 2022):

• Data Know-how – 25.93%
• Well being Care – 15.3%
• Financials – 11.78%
• Client Discretionary – 10.37%
• Industrials – 8.56%
• Client Staples – 7.08%
• Power – 5.25%
• Utilities – 3.0%
• Supplies – 2.70%
• Actual Property – 2.69%

As soon as once more, the order and share of every sector throughout the SPY and the VOO are barely completely different, because of completely different reporting dates by every fund.

>>Associated: QQQ vs SPY – Which Fund Ought to You Select?

VOO vs. SPY Efficiency

The desk under presents a side-by-side comparability of the market worth efficiency of shares in each the VOO and SPY in time frames ranging between one month and since every fund’s inception:

Discover that the returns for every timeframe are almost similar. The primary distinction is that whereas the one-month and three-month performances of the SPY are greater than they’re for the VOO, whereas the VOO is constantly barely greater for 1-, 3-, 5-, and 10-years. There may be, after all, a big distinction in efficiency since inception, owing primarily to the truth that the SPY has been round loads longer than the VOO.

Nevertheless, there may be an obvious discrepancy within the three month’s return reported by the SPY. It matches precisely with the one-month efficiency. This owes to variations in the way in which the three month’s outcomes are reported by the 2 funds. Whereas VOO studies outcomes for the newest three months, SPY studies for the precise quarter. Their outcomes mirror a brief quarter, which is the primary month of the fourth quarter (October) solely.

This explains each why SPY’s one-month and three-month reported performances are similar, and why the three-month outcome isn’t much like that reported by VOO.

Dividends Distributions

Dividend distributions for each the VOO and the SPY are proven under in a side-by-side comparability for the previous 4 quarters:

Since share costs for VOO and SPY are completely different, the dividend yield is extra necessary than the greenback quantity paid every quarter. And primarily based on that share, the VOO dividend yield is 0.09% greater than that of the SPY.

Key Similarities Between VOO vs. SPY

In most regards, VOO and SPY are related funds. Each are massive cap funds primarily based on the S&P 500 Index. Which means neither consists of small- or mid-cap shares, worldwide shares, or any emphasis on particular business sectors, like healthcare, know-how or vitality.

Which means every fund ought to characterize a core holding in your portfolio, designed to match the efficiency of the most important corporations within the nation. However when you’re on the lookout for development, sector focus, or worldwide diversification, you’ll want so as to add funds focusing on these classes.

However nonetheless one more reason why VOO and SPY are core holdings is as a result of they’re extra conservative in nature. As a result of they’re primarily based on the most important – and subsequently probably the most steady – corporations in America, they’re much less prone to take vast worth fluctuations the way in which small-cap shares do.

And there’s a vital quantity of diversification throughout a number of industries, as we noticed with the assorted sector holdings of every fund. For instance, every fund does have allocations in know-how, healthcare, vitality, and even actual property.

Both fund will be bought via in style funding brokers, like TD Ameritrade, Robinhood, or SoFi Make investments.

In case you choose a managed portfolio choice, you’ll be able to put money into both fund via M1 Finance. It’s an internet, automated funding administration service, generally often called a robo-advisor. You possibly can create customized portfolios, known as “pies”, that may be full of as much as 100 ETFs and particular person shares. And you may have as many pies as you want. Not solely are there no commissions so as to add shares and ETFs to your pies, however there are additionally no funding administration charges charged by M1 Finance.

Key Variations Between VOO vs. SPY

Essentially the most evident distinction between VOO and SPY is of their respective expense ratios. VOO sits at a really low 0.03%, whereas SPY has a nonetheless very low (however not fairly as little as VOO) 0.0945%. Although the distinction is simply 0.0645% per 12 months, it could actually add up over time. That is very true of a core holding fund, which is designed to be held for a few years.

It’s seemingly this distinction within the expense ratio between the 2 funds explains why the longer-term efficiency of VOO is constantly barely greater than that of the SPY.

The Backside Line: Which One Makes Sense for You?

Since each funds match the S&P 500 Index, they actually serve the identical goal. For that cause, both is sensible inside a well-diversified portfolio. That is evidenced by the truth that each funds are in style amongst professionally managed funds.

However if you’re actually dedicated to getting the easiest long-term efficiency in your fund, the VOO comes out on prime. That’s strictly by advantage of the truth that its expense ratio is barely decrease than that of the SPY, offering superior long-term efficiency.