The Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF Belief (SPY) are two of the most well-liked giant cap change traded funds (ETFs) within the funding trade. 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 possibly can’t go incorrect 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 should solely marginally favor both in numerous classes.
The Quick Model
- Each VOO and SPY are index funds based mostly on the S&P 500.
- Inventory holdings and sector allocations are practically an identical.
- Efficiency can be practically an identical, however the VOO has barely outperformed the SPY over the long run.
- Each funds are simply obtainable at well-liked funding brokers and thru robo-advisors.
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 inside the fund in an effort to outperform the market.
This passive high quality means each funds have very low expense ratios, because of the 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 america. Which means it’s primarily a big cap inventory fund. And since it’s, the businesses included within the index are typically a number of the most dynamic and modern of their respective fields. Most in reality, 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 aside from a 1/500 share of total holdings. As an alternative, an organization’s illustration inside the index relies on the whole market worth of its excellent inventory. Which means an organization with $100 billion in market capitalization will occupy an even bigger area within the index than one with $20 billion in capitalization.
The VOO and SPY, as index funds based mostly 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 identify implies, the Vanguard S&P 500 ETF is a part of the Vanguard Group. With greater than $7 trillion in complete belongings beneath administration, Vanguard is the biggest issuer of mutual funds on this planet, and the second largest supplier of change traded funds (ETFs).
Primary info and statistics in regards to the VOO are as follows:
- Index it tracks: S&P 500 Index
- Variety of shares: 503
- Date launched: September 7, 2010
- Complete belongings: $748.1 billion
- Market value: $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 embrace small- and mid-cap shares that always present the best long-term development potential. And neither the fund nor the S&P 500 Index provide any publicity to worldwide corporations.
Holdings:
There are 503 corporations held within the VOO, with a median market capitalization of $147.0 billion. The typical earnings development fee is nineteen.6%, and the price-earnings ratio is nineteen.5 instances earnings. Return on fairness is reported at 22.3%.
Listed below 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 trade sectors, which collectively characterize 100% of the fund’s holdings.
Under are the 11 sectors inside the VOO, with the share of the fund every represents:
- Data Expertise – 26.3%
- Well being Care – 15.3%
- Financials – 11.4%
- Shopper Discretionary – 10.9%
- Industrials – 8.3%
- Shopper 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 Avenue International Advisors Belief Firm (SSGA), and just like the VOO, the fund tracks the S&P 500 Index.
Primary info and statistics in regards to the SPY are as follows:
- Index it tracks: S&P 500 Index
- Variety of shares: 503
- Date launched: January 22, 1993
- Complete belongings: $375.15 billion
- Market value: $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
Similar to the VOO, the SPY holds solely large-cap shares. It supplies 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 fee is nineteen.6%, and the price-earnings ratio is 17.36 instances earnings.
Listed below 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%
Observe that each the order of the highest 10 holdings and the % 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 printed as of November 29.
Sectors:
Similar to the VOO, the sectors held within the SPY are an identical to the S&P 500 index. The SPY is comprised of 11 completely different trade sectors, which collectively characterize 100% of the fund’s holdings.
Under are the 11 sectors inside the SPY, with the share of the fund every represents (as of November 29, 2022):
- Data Expertise – 25.93%
- Well being Care – 15.3%
- Financials – 11.78%
- Shopper Discretionary – 10.37%
- Industrials – 8.56%
- Shopper Staples – 7.08%
- Power – 5.25%
- Utilities – 3.0%
- Supplies – 2.70%
- Actual Property – 2.69%
As soon as once more, the order and proportion of every sector inside the SPY and the VOO are barely completely different, resulting from completely different reporting dates by every fund.
>>Associated: QQQ vs SPY – Which Fund Ought to You Select?
VOO vs. SPY Efficiency
The desk beneath 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:
| Fund/ Time period | VOO (via 10/31/2022) | SPY (via 10/31/2022) |
|---|---|---|
| One month | 7.97% | 8.13% |
| Three months | -5.88% | 8.13% |
| Yr-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) |
Discover that the returns for every timeframe are practically an identical. The principle distinction is that whereas the one-month and three-month performances of the SPY are larger than they’re for the VOO, whereas the VOO is constantly barely larger 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 lots longer than the VOO.
Nevertheless, there’s 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 best way the three month’s outcomes are reported by the 2 funds. Whereas VOO reviews outcomes for the latest three months, SPY reviews for the precise quarter. Their outcomes replicate 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 an identical, and why the three-month outcome isn’t just like that reported by VOO.
Dividends Distributions
Dividend distributions for each the VOO and the SPY are proven beneath in a side-by-side comparability for the previous 4 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 costs for VOO and SPY are completely different, the dividend yield is extra necessary than the greenback quantity paid every quarter. And based mostly on that proportion, the VOO dividend yield is 0.09% larger than that of the SPY.
Key Similarities Between VOO vs. SPY
In most regards, VOO and SPY are related funds. Each are giant cap funds based mostly on the S&P 500 Index. Which means neither contains small- or mid-cap shares, worldwide shares, or any emphasis on particular trade 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 biggest corporations within the nation. However if you happen to’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 based mostly on the biggest – and subsequently probably the most secure – corporations in America, they’re much less more likely to take vast value fluctuations the best way small-cap shares do.
And there’s a vital quantity of diversification throughout a number of industries, as we noticed with the varied sector holdings of every fund. For instance, every fund does have allocations in know-how, healthcare, vitality, and even actual property.
Both fund could be bought via well-liked funding brokers, like TD Ameritrade, Robinhood, or SoFi Make investments.
When you want a managed portfolio possibility, you possibly can spend money on both fund via M1 Finance. It’s an internet, automated funding administration service, generally often known as a robo-advisor. You’ll be able to create customized portfolios, known as “pies”, that may be stuffed with as much as 100 ETFs and particular person shares. And you’ll 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
Probably 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 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 probably this distinction within the expense ratio between the 2 funds explains why the longer-term efficiency of VOO is constantly barely larger 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 motive, both is smart inside a well-diversified portfolio. That is evidenced by the truth that each funds are well-liked amongst professionally managed funds.
