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The Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF Belief (SPY) are two of the most well-liked massive cap change traded funds (ETFs) within the funding business. 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 monitor the S&P 500 Index, so you possibly can’t go mistaken 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 will solely marginally favor both in several classes.
The Brief Model
- Each VOO and SPY are index funds based mostly on the S&P 500.
- Inventory holdings and sector allocations are almost equivalent.
- Efficiency can also be almost equivalent, however the VOO has barely outperformed the SPY over the long run.
- Each funds are simply obtainable at standard funding brokers and thru robo-advisors.
What are VOO and SPY?
Each the VOO and the SPY are index funds that monitor 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 throughout the fund in an effort to outperform the market.
This passive high quality means each funds have very low expense ratios, as a result of 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 the USA. Which means it’s primarily a big cap inventory fund. And since it’s, the businesses included within the index are typically a few of the most dynamic and progressive 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 general holdings. As an alternative, an organization’s illustration throughout the index relies on the entire market worth of its excellent inventory. Which means an organization with $100 billion in market capitalization will occupy a much 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 apply.
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 title implies, the Vanguard S&P 500 ETF is a part of the Vanguard Group. With greater than $7 trillion in whole belongings below administration, Vanguard is the biggest issuer of mutual funds on the earth, and the second largest supplier of change traded funds (ETFs).
Primary details 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 worth: $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 embody small- and mid-cap shares that always present the best long-term progress 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 common earnings progress fee is nineteen.6%, and the price-earnings ratio is nineteen.5 occasions earnings. Return on fairness is reported at 22.3%.
Listed here are the highest ten holdings within the VOO, together with the proportion 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:
According to the S&P 500 index, the VOO is comprised of 11 completely different business sectors, which collectively signify 100% of the fund’s holdings.
Under are the 11 sectors throughout the VOO, with the proportion of the fund every represents:
- Data Know-how – 26.3%
- Well being Care – 15.3%
- Financials – 11.4%
- Client Discretionary – 10.9%
- Industrials – 8.3%
- Client Staples – 6.9%
- Power – 5.4%
- Utilities – 3.0%
- Actual Property – 2.6%
- Supplies – 2.5%
>>Associated: QQQ vs VOO – Which is the Better ETF?
An Introduction to SPY
The SPDR S&P 500 ETF Belief is sponsored by State Road International Advisors Belief Firm (SSGA), and just like the VOO, the fund tracks the S&P 500 Index.
Primary details 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 worth: $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
Identical 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 common earnings progress fee is nineteen.6%, and the price-earnings ratio is 17.36 occasions earnings.
Listed here are the highest ten holdings within the SPY, together with the proportion 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%
Word 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 introduced as of October 31, whereas the lineup of the SPY is printed as of November 29.
Sectors:
Identical to the VOO, the sectors held within the SPY are equivalent to the S&P 500 index. The SPY is comprised of 11 completely different business sectors, which collectively signify 100% of the fund’s holdings.
Under are the 11 sectors throughout the SPY, with the proportion of the fund every represents (as of November 29, 2022):
- Data Know-how – 25.93%
- Well being Care – 15.3%
- Financials – 11.78%
- Client Discretionary – 10.37%
- Industrials – 8.56%
- Client 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 throughout the SPY and the VOO are barely completely different, on account of completely different reporting dates by every fund.
>>Associated: QQQ vs SPY – Which Fund Should You Choose?
VOO vs. SPY Efficiency
The desk under 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 (by means of 10/31/2022) | SPY (by means of 10/31/2022) |
|---|---|---|
| One month | 7.97% | 8.13% |
| Three months | -5.88% | 8.13% |
| 12 months-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 almost equivalent. The primary 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’s, in fact, a major distinction in efficiency since inception, owing primarily to the truth that the SPY has been round so much longer than the VOO.
Nonetheless, there may be 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 studies outcomes for the latest three months, SPY studies for the precise quarter. Their outcomes mirror 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 equivalent, 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 under 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 essential 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 massive cap funds based mostly on the S&P 500 Index. Which means neither consists of small- or mid-cap shares, worldwide shares, or any emphasis on particular business sectors, like healthcare, expertise or vitality.
Which means every fund ought to signify a core holding in your portfolio, designed to match the efficiency of the biggest corporations within the nation. However should you’re searching for progress, sector focus, or worldwide diversification, you’ll want so as to add funds focusing on these classes.
However nonetheless another excuse 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 steady – corporations in America, they’re much less more likely to take large worth fluctuations the best way small-cap shares do.
And there’s a important quantity of diversification throughout a number of industries, as we noticed with the assorted sector holdings of every fund. For instance, every fund does have allocations in expertise, healthcare, vitality, and even actual property.
Both fund may be bought by means of standard funding brokers, like TD Ameritrade, Robinhood, or SoFi Invest.
Should you favor a managed portfolio choice, you possibly can spend money on both fund by means of M1 Finance. It’s a web based, automated funding administration service, generally generally known as a robo-advisor. You’ll be able to create customized portfolios, known as “pies”, that may be crammed with as much as 100 ETFs and particular person shares. And you may 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
Essentially the most obtrusive 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 yr, it will probably 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 seemingly 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 function. For that motive, both is smart inside a well-diversified portfolio. That is evidenced by the truth that each funds are standard amongst professionally managed funds.
However if you’re really dedicated to getting the perfect long-term efficiency in your fund, the VOO comes out on prime. That’s strictly by advantage of the truth that its expense ratio is barely decrease than that of the SPY, offering superior long-term efficiency.
