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VOO vs. SPY

VOO vs. SPY: Which fund should you choose?

Moneywise.com / Moneywise.com

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Updated: August 16, 2023

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The Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF Trust (SPY) are two of the most popular large cap exchange traded funds (ETFs) in the investment industry. Both are commonly found in professionally managed portfolios, including both traditional human-guided portfolios and those of robo-advisors.

But is one fund better than the other? After all, both track the S&P 500 Index, so you can’t go wrong with either. But that’s what we’re going to examine in this VOO vs. SPY analysis.

Spoiler alert: these two funds line up about as closely as two competing ETFs possibly can. The differences between them are very slight and may only marginally favor either in different categories.

The short version

• Both VOO and SPY are index funds based on the S&P 500.

• Stock holdings and sector allocations are nearly identical.

• Performance is also nearly identical, but the VOO has slightly outperformed the SPY over the long term.

• Both funds are easily available at popular investment brokers and through robo-advisors.

What are VOO and SPY?

Both the VOO and the SPY are index funds that track the S&P 500 Index (SPX). As index funds, each is a passive fund. That means it works only to match the performance of the underlying index. No attempt is made to actively trading stocks within the fund in an effort to outperform the market.

This passive quality means both funds have very low expense ratios, due to the rarity of trading activity. Neither fund will either outperform or underperform the index.

Meanwhile, the S&P 500 Index represents the 500 or so largest publicly traded corporations in the United States. That means it is essentially a large cap stock fund. And because it is, the companies included in the index are generally some of the most dynamic and innovative in their respective fields. Most in fact, are household names.

The S&P 500 Index is a market-weighted index. Because it is, each company held in the index is represented by something other than a 1/500 share of overall holdings. Instead, a company’s representation within the index is based on the total market value of its outstanding stock. That means a company with $100 billion in market capitalization will occupy a bigger space in the index than one with $20 billion in capitalization.

The VOO and SPY, as index funds based on the S&P 500, employ the same practice.

The S&P 500 is a cornerstone holding in most portfolios. That’s because the index is considered to be the most accurate barometer of the overall stock market. Funds tied to the S&P 500 are commonly found in professionally managed investment accounts. VOO and SPY are among the most popular of those funds.

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An introduction to VOO

As the name implies, the Vanguard S&P 500 ETF is part of the Vanguard Group. With more than $7 trillion in total assets under management, Vanguard is the largest issuer of mutual funds in the world, and the second largest provider of exchange traded funds (ETFs).

Basic facts and statistics about the VOO are as follows:

  • Index it tracks: S&P 500 Index
  • Number of stocks: 503
  • Date launched: September 7, 2010
  • Total assets: $748.1 billion
  • Market price: $374.52 (Nov. 30, 2022)
  • 52-week high/low: $439.25 / $327.68
  • Expense ratio: 0.03%
  • Last quarterly dividend: $1.46920 (paid 10/03/2022)
  • Dividend yield: 1.63%
  • Dividend frequency: Quarterly
  • Minimum investment: $1

As a large cap fund, the VOO does not include small- and mid-cap stocks that often provide the greatest long-term growth potential. And neither the fund nor the S&P 500 Index offer any exposure to international companies.

Holdings

There are 503 companies held in the VOO, with an average market capitalization of $147.0 billion. The average earnings growth rate is 19.6%, and the price-earnings ratio is 19.5 times earnings. Return on equity is reported at 22.3%.

Here are the top ten holdings in the VOO, including the percentage of the fund each 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 Mobile Corp. (XOM) – 1.40%
  • Johnson & Johnson (JNJ) – 1.39%

Sectors

Consistent with the S&P 500 index, the VOO is comprised of 11 different industry sectors, which together represent 100% of the fund’s holdings.

Below are the 11 sectors within the VOO, with the percentage of the fund each represents:

  • Information Technology – 26.3%
  • Health Care – 15.3%
  • Financials – 11.4%
  • Consumer Discretionary – 10.9%
  • Industrials – 8.3%
  • Consumer Staples – 6.9%
  • Energy – 5.4%
  • Utilities – 3.0%
  • Real Estate – 2.6%
  • Materials – 2.5%

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An introduction to SPY

The SPDR S&P 500 ETF Trust is sponsored by State Street Global Advisors Trust Company (SSGA), and like the VOO, the fund tracks the S&P 500 Index.

Basic facts and statistics about the SPY are as follows:

  • Index it tracks: S&P 500 Index
  • Number of stocks: 503
  • Date launched: January 22, 1993
  • Total assets: $375.15 billion
  • Market price: $395.34 (Nov. 29, 2022)
  • 52-week high/low: $479.98 / $348.11
  • Expense ratio: 0.0945%
  • Last quarterly dividend: $1.596 (paid 10/31/2022)
  • Dividend yield: 1.54%
  • Dividend frequency: Quarterly
  • Minimum investment: $1

Just like the VOO, the SPY holds only large-cap stocks. It provides no exposure to small- and mid-cap stocks, or international stocks.

Holdings

Matching the S&P 500 Index, the SPY also holds stock in 503 large-cap companies with a weighted average market capitalization of $444.9 billion. The average earnings growth rate is 19.6%, and the price-earnings ratio is 17.36 times earnings.

Here are the top ten holdings in the SPY, including the percentage of the fund each 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 Mobile Corp. (XOM) – 1.38%

Note that both the order of the top 10 holdings and the percent of the fund each represents is slightly different than that of the VOO. This is the timing difference, owing to the fact that VOO holdings data is presented as of October 31, while the lineup of the SPY is published as of November 29.

Sectors

Just like the VOO, the sectors held in the SPY are identical to the S&P 500 index. The SPY is comprised of 11 different industry sectors, which together represent 100% of the fund’s holdings.

Below are the 11 sectors within the SPY, with the percentage of the fund each represents (as of November 29, 2022):

  • Information Technology – 25.93%
  • Health Care – 15.3%
  • Financials – 11.78%
  • Consumer Discretionary – 10.37%
  • Industrials – 8.56%
  • Consumer Staples – 7.08%
  • Energy – 5.25%
  • Utilities – 3.0%
  • Materials – 2.70%
  • Real Estate – 2.69%

Once again, the order and percentage of each sector within the SPY and the VOO are slightly different, due to different reporting dates by each fund.

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VOO vs. SPY performance

The table below presents a side-by-side comparison of the market value performance of shares in both the VOO and SPY in time frames ranging between one month and since each fund’s inception:

Fund/Term VOO (Through 10/31/2022) SPY (Through 10/31/2022)
One month 7.97% 8.13%
Three months -5.88% 8.13%
Year-to-date -17.71% -17.77%
1-year -14.61% -14.65%
3-years 10.16% 10.07%
5-years 10.40% 10.30%
10-years 12.74% 12.65%
Since inception 13.15% (9/7/2010) 9.61% (1/22/1993)

Notice that the returns for each timeframe are nearly identical. The main difference is that while the one-month and three-month performances of the SPY are higher than they are for the VOO, while the VOO is consistently slightly higher for 1-, 3-, 5-, and 10-years. There is, of course, a significant difference in performance since inception, owing primarily to the fact that the SPY has been around a lot longer than the VOO.

However, there is an apparent discrepancy in the three month’s return reported by the SPY. It matches exactly with the one-month performance. This owes to differences in the way the three month’s results are reported by the two funds. While VOO reports results for the most recent three months, SPY reports for the actual quarter. Their results reflect a short quarter, which is the first month of the fourth quarter (October) only.

This explains both why SPY’s one-month and three-month reported performances are identical, and why the three-month result isn’t similar to that reported by VOO.

VOO vs. SPY: Dividends distributions

Dividend distributions for both the VOO and the SPY are shown below in a side-by-side comparison for the past four quarters:

VOO
SPY
$1.4692 paid 10/03/2022
$1.596 paid 10/31/2022
$1.4321 paid 07/05/2022
$1.577 paid 07/29/2022
$1.3737 paid 03/29/2022
$1.366 paid 04/29/2022
$1.5329 paid 12/27/2021
$1.636 paid 01/31/2022
Dividend yield: 1.63%
Dividend yield: 1.54%

Since share prices for VOO and SPY are different, the dividend yield is more important than the dollar amount paid each quarter. And based on that percentage, the VOO dividend yield is 0.09% higher than that of the SPY.

VOO vs. SPY: Key similarities

In most regards, VOO and SPY are similar funds. Both are large cap funds based on the S&P 500 Index. That means neither includes small- or mid-cap stocks, international stocks, or any emphasis on specific industry sectors, like healthcare, technology or energy.

That means each fund should represent a core holding in your portfolio, designed to match the performance of the largest companies in the country. But if you’re looking for growth, sector concentration, or international diversification, you’ll need to add funds that specialize in those categories.

But still another reason why VOO and SPY are core holdings is because they are more conservative in nature. Because they are based on the largest – and therefore the most stable – companies in America, they’re less likely to take wide price fluctuations the way small-cap stocks do.

And there is a significant amount of diversification across multiple industries, as we saw with the various sector holdings of each fund. For example, each fund does have allocations in technology, healthcare, energy, and even real estate.

Either fund can be purchased through popular investment brokers, like Robinhood or SoFi Invest.

If you prefer a managed portfolio option, you can invest in either fund through M1. It’s an online, automated investment management service, commonly known as a robo-advisor. You can create custom portfolios, referred to as “pies”, that can be filled with up to 100 ETFs and individual stocks. And you can have as many pies as you like. Not only are there no commissions to add stocks and ETFs to your pies, but there are also no investment management fees charged by M1 Finance.

VOO vs. SPY: Key differences

The most glaring difference between VOO and SPY is in their respective expense ratios. VOO sits at a very low 0.03%, while SPY has a still very low (but not quite as low as VOO) 0.0945%. Though the difference is just 0.0645% per year, it can add up over time. This is especially true of a core holding fund, which is designed to be held for many years.

It’s likely this difference in the expense ratio between the two funds explains why the longer-term performance of VOO is consistently slightly higher than that of the SPY.

Bottom line: Which one makes sense for you?

Since both funds match the S&P 500 Index, they really serve the same purpose. For that reason, either makes sense within a well-diversified portfolio. This is evidenced by the fact that both funds are popular among professionally managed funds.

But if you are truly committed to getting the very best long-term performance on your fund, the VOO comes out on top. That’s strictly by virtue of the fact that its expense ratio is slightly lower than that of the SPY, providing superior long-term performance.

Kevin Mercadante Freelance Contributor

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com.

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