SPY vs VOO: Which S&P 500 ETF is Better?

SPY vs VOO: Which S&P 500 ETF is Better?

When people compare SPY vs VOO, they are really deciding how to own the same thing, the S&P 500. Both ETFs track the same index, both are huge, and both are used as “core” building blocks in portfolios.

Where they differ is how they are built and who they are best for:

• SPY is the original S&P 500 ETF and a favourite with traders.
• VOO is the low cost, long term vehicle that keeps attracting buy-and-hold investors.

If you’re reading this article, you’re probably caught in a dilemma whether to choose SPY or VOO. Let’s walk through what they share, what separates them, and how to decide which one fits your strategy.

What SPY and VOO Have in Common

Same index, same core exposure

SPY and VOO both track the S&P 500, which holds around 500 of the largest US stocks and covers roughly 80% of the US equity market. That means broad exposure to big names in tech, healthcare, financials, consumer stocks, and more.

Because they follow the same index:

• Their top holdings are almost identical. It usually consists of Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta and other mega caps.
• Sector weights are very similar, with a strong tilt toward technology and communication services.

Remember, the S&P 500 is large cap only. Mid caps and small caps are not included, so SPY and VOO do not represent the entire US market, just the biggest companies.

If your goal is simply to “buy the S&P 500”, either ETF does the job.

Market-Cap Weighting and Concentration

Both ETFs use market-cap weighting:

• Bigger companies get bigger weights in the index.
• Turnover stays low, which helps keep costs and taxes down.

The trade-off is concentration risk. By the end of 2024, the top 10 stocks made up around 37% of the index and technology names accounted for roughly 34%, the highest since the dot-com era. SPY and VOO are just mirrors of that reality, so whichever you pick, a handful of mega-cap US tech stocks will drive a big part of your returns.

Very similar long term returns

Because SPY and VOO track the same index and holds almost the same portfolio, their long term performance is extremely close. Over three, five and ten year periods, the difference in annualised returns is usually just a few basis points.

Most of the small gap comes from fees and structural details, not from big bets or timing differences.

Key Differences Between SPY and VOO

Now for the important part of the SPY vs VOO decision: how they are built and used.

1. Fees and ongoing costs

This is the biggest, clearest difference for long term investors:

• SPY charges an expense ratio of about 0.0945% per year.
• VOO charges 0.03% per year.

On 10,000 dollars, that is roughly 9.45 dollars vs 3 dollars per year. It does not sound like much in a single year, but over 20 or 30 years that extra 0.06% compounds and eats into your final balance.

With everything else being equal, the ETF with the lower fee starts slightly ahead every single year, which is why VOO consistently gets flagged as the more cost-effective choice for buy-and-hold investors.

2. Structure and what the fund can do

SPY and VOO sit on different legal structures, and that affects how they operate.

• SPY is a unit investment trust (UIT), an older structure with tighter rules. Its managers:
  • Cannot reinvest dividends back into the portfolio between payment dates
  • Cannot use derivatives to “equitise” cash
  • Have limited ability to lend securities for extra income
• VOO is an open-ended ETF share class of Vanguard’s 500 Index Fund. It can:
  • Reinvest dividends and keep cash closer to fully invested
  • Use standard ETF mechanics such as in-kind creations and redemptions
  • Run securities lending and cash management more flexibly

Analysts describe these as small but meaningful structural inefficiencies on SPY’s side. None of them make SPY a bad fund, but they give VOO a slight edge in tracking and efficiency when everything else is the same.

3. Liquidity and trading behaviour

This is where SPY still dominates.

• SPY is one of the most traded ETFs in the world, regularly turning over tens of billions of dollars in value per day.
• It has a huge options market with deep open interest and tight spreads across many strikes and expiries.
• Institutions, hedge funds and short-term traders use SPY as a primary tool for hedging and trading the index.

VOO also trades actively and generally has tight bid-ask spreads, but its volume and options ecosystem are much smaller than SPY’s.

In simple terms:

• SPY is built for trading the S&P 500.
• VOO is built for owning the S&P 500.

4. Analyst ratings and independent views

Research groups largely agree that both funds are strong, but they do not score them equally. Independent ETF research and comparison tools generally see both SPY and VOO as high-quality core S&P 500 trackers, but they still tend to lean slightly toward VOO for long term investors.

The reasoning is straightforward:

• Cost – With a lower expense ratio, VOO leaves a bit more of the index return in investors’ hands every year. Over decades, that small fee gap compounds.
• Structure – SPY’s older unit investment trust structure is less flexible, so it cannot reinvest dividends between payouts or manage cash as efficiently as a modern ETF. VOO’s structure makes it easier to stay fully invested and track the index more tightly.

Morningstar’s analysts describe SPY and VOO as “rock-bottom cost” ways to own US large caps, but conclude that VOO is the cleaner implementation of the same S&P 500 strategy, especially for buy and hold investors.

SPY vs VOO: Which One Fits You Better

Best For	Choose SPY If…	Choose VOO If…
Your style	You’re an active trader who watches the market intraday.	You’re a long term investor focused on building wealth over years.
How often you trade	You trade or hedge the S&P 500 frequently.	You buy, add regularly, and rarely sell.
Use of options	You use S&P 500 options heavily and need the deepest options market.	You use options little or not at all.
Top priority	Ultra high liquidity and fast execution matter most.	Low ongoing fees and tight index tracking matter most.
Typical trade size	You move large orders where tiny spread differences are important.	Your trades are small to medium and regular ETF liquidity is enough.
How you see the ETF	A trading instrument to adjust exposure quickly.	A core holding in your long term or retirement portfolio.

If most of your answers line up with the SPY column, you are closer to a trader profile.

If most line up with the VOO column, you are closer to a long term, buy and hold profile.

That makes the SPY vs VOO choice less about “which is better in general” and more about “which matches how you actually invest.”

Risks Both SPY and VOO Share

Regardless of which ticker you choose, the main risks come from the index itself, not the wrapper.

With either SPY or VOO:

• You are concentrated in US large caps. Mid caps, small caps and non-US stocks are missing.
• A small group of mega-cap companies drives a big chunk of your returns – the top 10 holdings make up well over a third of the index.
• You carry heavy exposure to technology and related sectors, which can be volatile.

That does not make SPY or VOO bad choices. It simply means they should sit inside a broader, diversified portfolio that matches your risk tolerance.

Final Thoughts on SPY vs VOO

On the surface, SPY vs VOO looks like a simple either–or question. In reality, both are excellent, but aimed at slightly different audiences.

If your main goal is to grow wealth steadily in the S&P 500 over the long run, VOO will usually be the more natural default. If your main goal is to trade the index actively, SPY is still the go-to tool.