VOO vs. SPY: Which Popular S&P 500 ETF Is the Better Buy?

The prime betwixt the Vanguard S&P 500 ETF (NYSEMKT:VOO) and the State Street SPDR S&P 500 ETF Trust (NYSEMKT:SPY) often comes down to outgo for semipermanent investors.

Both funds service arsenic foundational gathering blocks, providing vulnerability to the 500 largest U.S. companies. While they way the aforesaid underlying index, structural differences and disbursal ratios tin power full returns for those holding these ETFs implicit respective decades.

Snapshot (cost & size)

Beta measures terms volatility comparative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year instrumentality represents full instrumentality implicit the trailing 12 months. Dividend output is the trailing-12-month organisation yield.

VOO is the cheaper option, carrying an disbursal ratio of 0.03% vs. SPY's 0.09%. Both funds connection a dividend output of astir 1%.

Performance & hazard examination

What's wrong

Under the hood, some funds look precise similar.

Launched successful 2010, VOO holds 505 stocks. Its largest positions see Nvidia (NASDAQ:NVDA) astatine 7.9%, Apple (NASDAQ:AAPL) astatine 7.0%, and Microsoft (NASDAQ:MSFT) astatine 5.1%. The ETF's assemblage weights are concentrated successful exertion astatine 39.1%, fiscal services astatine 10.9%, and connection services astatine 10.7%.

SPY holds 503 stocks and was launched successful 1993 -- making it the oldest U.S.-listed ETF inactive trading today. Its largest positions see Nvidia astatine 7.9%, Apple astatine 7.1%, and Microsoft astatine 5.1%. Its apical assemblage weights see exertion astatine 39.1%, fiscal services astatine 11.1%, and connection services astatine 10.6%.

As a portion concern spot -- a bequest ineligible operation that predates modern ETF plan -- SPY is legally required to clasp incoming dividends successful a non-interest-bearing currency relationship until they are distributed quarterly, alternatively than putting that wealth backmost to enactment immediately. It besides cannot prosecute successful securities lending. VOO, arsenic an open-end fund, does some -- reinvesting dividends close distant and lending securities for further income -- giving it a tiny but structural borderline that tin compound implicit time.

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What this means for investors

At archetypal glance, VOO and SPY look astir identical -- and for astir applicable purposes, they are. Both springiness you wide vulnerability to the U.S. economy's biggest companies. But "nearly identical" isn't the aforesaid arsenic identical, and for semipermanent investors, the differences are worthy understanding.