VOO vs SPY: Head To Head Comparison

VOO vs SPY: Head To Head Comparison

There is a lot of debate between which S&P 500 Index Fund is the best investment.  Today we will compare two very popular Exchange-Traded Funds (ETFs) VOO vs SPY to help you determine which one is best for you.

I’m also going to show you how to maximize your investments by purchasing fractional shares of these ETFs.  This will help you achieve higher returns over the long-term!

 

VOO vs SPY

The primary difference between Vanguard’s S&P 500 ETF (VOO) and SPDR S&P 500 ETF Trust (SPY) is the expense ratio of the two funds.  VOO has an amazingly low expense ratio of only 0.03%.  Meanwhile, SPY still has a low expense ratio but it is slightly higher at 0.09%.  Another difference is VOO is a Vanguard ETF while SPY is not.

Both ETFs seek to track the returns of the S&P 500 Index.  This gives investors exposure to 500 of the largest companies in the United States and accounts for about three-quarters of the U.S stock market’s value.

VOO vs SPY Graphic

 

This is how their performance compares over the last 10 years:

SPY vs VOO Performance

 

VOO Overview

  • Fund Inception: 2010
  • 5-Year Performance 9.82%
  • Aims To Track The S&P 500
  • Expense Ratio: 0.03%
  • Number Of Stocks: 508
  • Top 10 Holdings: 24.80%
  • Yield 1.84%

 

Vanguard’s S&P 500 ETF (VOO) is the ETF equivalent of Vanguard’s 500 Index Fund Admiral Shares (VFIAX)

These are the top 10 holdings for VOO:

VOO Holdings

From the chart we can see, VOO is largely made up of Microsoft, Apple, Alphabet, Amazon, and Facebook, but also provides exposure to over 500 other stocks.

 

SPY Overview

  • Fund Inception: 1993
  • 10-Year Performance 11.04%
  • Aims To Track The S&P 500
  • Expense Ratio: 0.09%
  • Number Of Stocks: 506
  • Top 10 Holdings: 25.1%
  • Yield 1.91%

 

SPDR S&P 500 ETF Trust (SPY) tracks the performance of the Standard & Poor’s 500 Index (S&P 500).

SPY was created in 1993, which makes this the oldest ETF around.  SPY is also one of the most popular ETFs funds available.  It currently has an expense ratio of 0.09% and offers exposure to over 500 stocks.

These are the top 10 holdings for SPY:

SPY Holdings

SPDR S&P 500 ETF Trust (SPY) is largely made up of Microsoft, Apple, Amazon, Facebook, and Berkshire Hathaway.  However, it also provides exposure to over 500 other stocks.

The reason SPY is so popular is that over the long term the S&P 500 has a strong track record of going up.

 

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No Minimum Investment

VOO and SPY are both Exchange-Traded Funds (ETFs), which means there is no minimum investment.  The only requirement is to the need to purchase at least one full-share.

Normally, fractional shares are not available for ETFs unless you use M1 Finance.  M1 Finance allows you to purchase fractional shares with no commission.

Buying fractional shares allows you to maximize your investment.  You won’t have to keep your money sitting idle until you have enough to purchase a full share.  This is especially beneficial when it comes to buying SPY because as of June 30, 2020, the price of one share of SPY is $308.

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Vanguard Investor Shares

Another option to start investing as soon as possible into VOO is to start with its investor share funds.  Investor share funds have no minimum investment threshold.  They also hold the same stocks as their admiral fund and ETF equivalents.

Equivalent Investor Share Funds

VOO = VFINX

The downside to investor share funds is their management fee is higher, so it’s best to convert to an admiral fund once you pass the $3000 minimum.

 

Which is Better SPY vs VOO?

SPY and VOO are very similar investments.  There are some advantages and disadvantages to both because they differ in the expense ratio and brokerage.

I would choose VOO because the expense ratio is lower compared to SPY.  VOO is also commission-free if purchased through Vanguard, which is the brokerage I prefer to use.  They are also both diversified with a similar number of stocks in their holdings.

 

Is SPY or VOO Better for Financial Independence?

Both SPY and VOO can get you to Financial Independence/Retire Early (FIRE).  They both have a similar return on investment.

However, commissions and fees can add up over the long term.

So, for those reasons I prefer VOO.

If you already have a Vanguard account it makes sense to go with VOO for the ability to purchase the ETF commission-free.  Vanguard also has some of the lowest fees and best index funds available overall.  I chose to invest in VOO instead of SPY because of this lower expense ratio.

After keeping fees to a minimum, you can work on increasing your savings rate and prioritizing your investments

This will have you well on your way to Financial Independence and Early Retirement!

 

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Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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