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The Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF Belief (SPY) are two of the preferred giant cap trade 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 any case, each monitor the S&P 500 Index, so you possibly can’t go unsuitable 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 intently as two competing ETFs presumably can. The variations between them are very slight and will solely marginally favor both in numerous classes.
The Quick Model
- Each VOO and SPY are index funds primarily based on the S&P 500.
- Inventory holdings and sector allocations are almost an identical.
- Efficiency can be almost an identical, however the VOO has barely outperformed the SPY over the long run.
- Each funds are simply out there at common 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. Meaning 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, 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 america. Meaning it’s basically a big cap inventory fund. And since it’s, the businesses included within the index are typically among 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 general holdings. As an alternative, an organization’s illustration inside the index is predicated on the overall market worth of its excellent inventory. Meaning 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 primarily based on the S&P 500, make use of the identical observe.
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 essentially 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 property beneath administration, Vanguard is the most important issuer of mutual funds on the earth, and the second largest supplier of trade traded funds (ETFs).
Fundamental 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
- Whole property: $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 usually 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 occasions earnings. Return on fairness is reported at 22.3%.
Listed below 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 Cell Corp. (XOM) – 1.40%
- Johnson & Johnson (JNJ) – 1.39%
Sectors:
According to the S&P 500 index, the VOO is comprised of 11 totally different trade sectors, which collectively signify 100% of the fund’s holdings.
Beneath are the 11 sectors inside the VOO, with the proportion of the fund every represents:
- Info Know-how – 26.3%
- Well being Care – 15.3%
- Financials – 11.4%
- Client Discretionary – 10.9%
- Industrials – 8.3%
- Client Staples – 6.9%
- Vitality – 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.
Fundamental 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
- Whole property: $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 offers 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 occasions earnings.
Listed below 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 Cell Corp. (XOM) – 1.38%
Notice that each the order of the highest 10 holdings and the % of the fund every represents is barely totally 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 revealed as of November 29.
Sectors:
Identical to the VOO, the sectors held within the SPY are an identical to the S&P 500 index. The SPY is comprised of 11 totally different trade sectors, which collectively signify 100% of the fund’s holdings.
Beneath are the 11 sectors inside the SPY, with the proportion of the fund every represents (as of November 29, 2022):
- Info Know-how – 25.93%
- Well being Care – 15.3%
- Financials – 11.78%
- Client Discretionary – 10.37%
- Industrials – 8.56%
- Client Staples – 7.08%
- Vitality – 5.25%
- Utilities – 3.0%
- Supplies – 2.70%
- Actual Property – 2.69%
As soon as once more, the order and share of every sector inside the SPY and the VOO are barely totally different, attributable to totally different reporting dates by every fund.
>>Associated: QQQ vs SPY – Which Fund Ought to You Select?
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 10/31/2022) | SPY (by 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 almost an identical. 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, after all, a major distinction in efficiency since inception, owing primarily to the truth that the SPY has been round lots longer than the VOO.
Nonetheless, 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 stories outcomes for the latest three months, SPY stories 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 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 totally different, the dividend yield is extra vital than the greenback quantity paid every quarter. And primarily based on that share, 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 primarily based on the S&P 500 Index. Meaning neither contains small- or mid-cap shares, worldwide shares, or any emphasis on particular trade sectors, like healthcare, know-how or vitality.
Meaning every fund ought to signify a core holding in your portfolio, designed to match the efficiency of the most important corporations within the nation. However should you’re in search of development, sector focus, or worldwide diversification, you’ll want so as to add funds specializing in 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 primarily based on the most important – and subsequently essentially 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 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 may be bought by common funding brokers, like TD Ameritrade, Robinhood, or SoFi Make investments.
If you happen to favor a managed portfolio possibility, you possibly can put money into both fund by M1 Finance. It’s a web based, automated funding administration service, generally referred to 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 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 will possibly 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 possible 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 sensible inside a well-diversified portfolio. That is evidenced by the truth that each funds are common amongst professionally managed funds.
However in case you are 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.
