VOO vs SPY: Complete Head-to-Head Comparison
Same index, same 500 stocks, nearly identical returns. The real differences are a 0.06% fee gap and SPY's unit-investment-trust structure. Here's which to buy.
Don't have time? Here's what you need to know:
- 1VOO and SPY track the same S&P 500 index — same holdings, nearly identical pre-fee returns.
- 2VOO costs 0.03% versus SPY's 0.0945%, about $64 more per year per $100,000 invested, and it compounds.
- 3SPY's only real edge is liquidity and options depth, which matter to traders, not long-term investors.
- 4Don't sell appreciated SPY in a taxable account to switch — redirect new money to VOO instead.
The Short Answer: VOO for Investors, SPY for Traders
VOO and SPY hold the same stocks. Both track the S&P 500 — the same ~500 large U.S. companies in the same proportions — so their gross, pre-fee returns are virtually identical year after year. The differences that matter are cost and fund structure, not what you own.
VOO (Vanguard) charges an expense ratio of 0.03%. SPY (State Street's SPDR) charges 0.0945% — roughly three times as much. For a buy-and-hold investor, that fee gap makes VOO, or its identical-cost twin IVV from iShares, the better default. SPY's one genuine advantage is liquidity: it is the most heavily traded ETF in the world with the deepest options market. That matters to active traders and institutions, not to someone dollar-cost averaging into retirement.
Cost: The 0.06% That Quietly Compounds
A 0.06% difference sounds trivial, and on a single year it nearly is — about $64 a year on a $100,000 balance. But an expense ratio is charged every year on your entire balance, and the money it skims can no longer compound for you. Over a 30-year holding period on a growing balance, that recurring drag quietly costs a multiple of the headline number.
The expense ratio is the single most reliable predictor of how two otherwise-identical funds will diverge. Since VOO and SPY own the same index, the lower-cost fund essentially has to win over time. Use the ETF return calculator to see how a fee difference plays out on your own contribution schedule.
| VOO | SPY | IVV | |
|---|---|---|---|
| Issuer | Vanguard | State Street (SPDR) | iShares (BlackRock) |
| Expense ratio | 0.03% | 0.0945% | 0.03% |
| Annual cost per $100k | $30 | ~$95 | $30 |
| Index tracked | S&P 500 | S&P 500 | S&P 500 |
| Launched | 2010 | 1993 | 2000 |
| Fund structure | Open-end fund | Unit investment trust | Open-end fund |
Tip: For a taxable buy-and-hold account, default to VOO or IVV. You pocket the fee difference every year for doing nothing differently.
Structure: Why SPY Lags by a Hair Beyond Its Fee
SPY launched in 1993 as the first U.S.-listed ETF, and it is legally a unit investment trust (UIT) rather than an open-end fund. That 1990s structure carries two small handicaps. First, SPY must hold dividends it receives as cash until it pays them out quarterly, rather than reinvesting them immediately — a minor 'cash drag' that costs return in rising markets. Second, a UIT cannot lend out its securities, a practice open-end funds use to earn a little extra income that offsets fees.
VOO and IVV are open-end funds with neither limitation: they reinvest dividends continuously and lend securities. The result is that VOO's total return has historically edged SPY's by slightly more than the raw fee difference alone would suggest. None of this is dramatic — over a decade it is a fraction of a percent — but it all points the same direction.
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Liquidity and Trading: Where SPY Actually Wins
SPY trades tens of millions of shares a day and routinely posts the tightest bid-ask spreads of any ETF, often a single penny. It also anchors the largest, most liquid options market in existence. If you trade frequently, write options, or need to move millions of dollars in a single order without nudging the price, SPY's depth is a real, measurable edge.
For an ordinary investor buying a few hundred dollars at a time, that edge is invisible. VOO is itself one of the largest and most liquid ETFs on the market; its spreads are a cent or two, which on a $500 purchase is a rounding error you will never notice. Paying an extra 0.06% every single year to access trading liquidity you will not use is a bad trade.
Important: Don't choose SPY for its liquidity unless you actually trade or use options. A long-term holder pays that premium forever and gets nothing back for it.
Which Should You Buy?
If you are investing for the long term — retirement, a brokerage account you will hold for years, automated monthly contributions — choose VOO or IVV and stop thinking about it. You get the same S&P 500 exposure at a third of SPY's cost. If you are an active trader or options user, SPY's liquidity justifies its higher fee for your use case.
One important caveat: if you already own SPY in a taxable account with large unrealized gains, do not sell it just to save 0.06%. The capital-gains tax you would trigger dwarfs years of fee savings. Instead, simply direct new contributions to VOO and let the SPY position ride. Inside an IRA or 401(k), switching is tax-free, so there is no reason not to move to the cheaper fund.
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Frequently Asked Questions
Is VOO or SPY better?
For long-term, buy-and-hold investors, VOO is better because it costs 0.03% versus SPY's 0.0945% while tracking the exact same S&P 500 index. SPY is better only if you are an active trader or options user who values its deeper liquidity. VOO and SPY are otherwise nearly interchangeable.
Do VOO and SPY hold the same stocks?
Yes. Both funds track the S&P 500, so they hold the same roughly 500 companies in nearly the same weights, led by the largest U.S. firms. Their underlying portfolios are functionally identical; the differences are in fees and fund structure, not holdings.
Why is SPY more expensive if it's identical to VOO?
SPY was the first U.S. ETF (1993) and is structured as a unit investment trust, an older format that limits dividend reinvestment and securities lending. State Street has kept its 0.0945% fee because SPY's unmatched trading liquidity keeps institutions and traders loyal regardless of cost. Vanguard's VOO and iShares' IVV instead compete on price at 0.03%, deliberately pricing for the cost-conscious buy-and-hold investor that SPY's fee leaves behind.
Should I sell my SPY to buy VOO?
In a tax-advantaged account like an IRA or 401(k), yes — switching is free and saves you 0.06% a year. In a taxable account, usually no: selling appreciated SPY triggers capital-gains tax that almost always outweighs the fee savings. The cleaner move is to point future SPY contributions at VOO from now on while letting the appreciated SPY shares sit untouched, so you trim costs without realizing a taxable gain.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.