VOO vs SPY: Which S&P 500 ETF Should You Buy?
Both track the S&P 500. Both work. The choice comes down to 0.03% vs 0.0945% expense ratio and whether you trade options on the ETF.
VOO is 3x cheaper (0.03% vs 0.0945%) and more tax-efficient via Vanguard's share class structure. SPY has the largest options market and tightest bid/ask for active traders. For buy-and-hold investors, VOO is the default winner. For options traders, SPY wins.
Quick stats
| Metric | VOO | SPY |
|---|---|---|
| Price | $652.78 | $710.14 |
| TTM yield | 1.09% | 1.04% |
| Real yield (NAV-adj.) | 1.51% | 1.44% |
| NAV change (period) | 38.2% | 38.2% |
| Annualized volatility | 1327.2% | 1330.6% |
| Distribution frequency | quarterly | quarterly |
| Expense ratio | 0.03% | 0.09% |
| Inception | 2010-09-07 | 1993-01-22 |
| AUM | ~$500B | ~$500B |
| 1Y dividend CAGR | 5.4% | 3.1% |
| 3Y dividend CAGR | 5.9% | 4.8% |
| 5Y dividend CAGR | 5.9% | 5.0% |
| 5Y price CAGR | 11.3% | 11.3% |
Strategy & holdings
These are both cap-weighted S&P 500 ETFs. They hold the same stocks in nearly the same proportions and track each other to within 1-2 basis points. The differences are structural: VOO is an open-ended ETF from Vanguard; SPY is a unit investment trust from State Street, the oldest US ETF (1993). The UIT structure limits SPY's ability to reinvest dividends internally, which creates a small cash drag.
Open-ended ETF tracking the S&P 500. Benefits from Vanguard's patented share class tax structure.
Unit investment trust tracking the S&P 500. Cannot reinvest dividends internally (small cash drag). Deepest options market of any US ETF.
SPY's structural disadvantages add up: higher expense ratio (roughly 6 bps of drag), small cash drag from UIT structure, and no Vanguard share-class tax magic. For a 30-year buy-and-hold investor, these compound into real money. SPY's advantage is options liquidity — its options market is by far the deepest and tightest-spread of any US ETF, which matters for traders running covered calls, spreads, or hedges. For someone who trades options monthly, SPY's spread advantage can offset the expense ratio gap.
Yield & distributions
Both pay roughly 1.2-1.5% yield quarterly. Yields move in lockstep because the underlying holdings are the same. SPY's UIT structure means dividends are held in cash briefly before being distributed, which creates a tiny drag.
Total return & NAV
VOO beats SPY by roughly 6-7 basis points annually on total return — the expense ratio difference plus the cash drag. Over 20-30 years this compounds into a meaningful gap on a large balance. Over any given 1-year period the difference is undetectable.
Risk & volatility
Risk profiles are effectively identical. Both are the S&P 500. Drawdowns track the index precisely.
Tax treatment
VOO benefits from Vanguard's patented share class structure, which allows it to avoid capital gains distributions that SPY occasionally makes. In a taxable account this is a small but real advantage for VOO.