They Track the Same Index — So What's Different?
VOO and SPY both track the S&P 500 Index, a market-cap-weighted collection of roughly 500 of the largest U.S. public companies. The index is maintained by S&P Dow Jones Indices, which selects constituents based on market capitalization, liquidity, domicile, public float, financial viability, and sector representation. Both funds replicate this index using full physical replication — they hold every stock in the index at its market-cap weight — rather than sampling or using derivatives.
On any given day, their price movements are virtually identical. If the S&P 500 rises 1.2%, both VOO and SPY will rise approximately 1.2%. The correlation between them is effectively 1.00.
So why do two versions of the same product exist? And why does it matter which one you choose?
The differences come down to four things: fees, fund structure, liquidity, and size. None of these will make or break your portfolio in a single year, but compounded over decades, they can add up to a meaningful difference in total wealth. If you're just getting started with index investing, our complete guide to VOO covers the fund's basics in depth.
SPY was the first ETF listed in the United States, launched in January 1993 by State Street Global Advisors. VOO arrived 17 years later, in September 2010, from Vanguard. That timing matters — the regulatory framework that governs ETFs evolved significantly between 1993 and 2010, and VOO was built under modern rules that give it structural advantages SPY can't easily replicate.
Expense Ratio: VOO Charges a Third of What SPY Does
This is the most important practical difference for buy-and-hold investors.
VOO charges 0.03% per year. SPY charges 0.09% per year. That means SPY costs exactly three times as much to own as VOO. Both funds are cheap by industry standards — the average U.S. equity ETF charges around 0.44% — but the gap between them compounds over time.
Here's what the fee difference looks like on a $100,000 investment over various time horizons, assuming 10% annual returns:
| Time Horizon | Cost in VOO | Cost in SPY | You Save |
|---|---|---|---|
| 10 years | ~$415 | ~$1,240 | ~$825 |
| 20 years | ~$1,440 | ~$4,290 | ~$2,850 |
| 30 years | ~$3,880 | ~$11,530 | ~$7,650 |
On larger portfolios, the savings grow proportionally. For a $500,000 investment over 30 years, the fee difference is roughly $38,000 — enough to fund a year of retirement spending for many households.
Why doesn't State Street just lower SPY's fee? Because SPY's legal structure — a unit investment trust created in 1993 — comes with higher operating constraints and costs. State Street launched SPLG (0.02%) as a cheaper alternative, but SPY's massive installed base of institutional traders keeps it alive despite the higher price. SPY generates hundreds of millions in annual revenue for State Street, and the institutional trading community has little reason to switch since their holding periods are short enough that the fee difference is negligible.
It's worth noting that 0.09% is still extremely cheap in absolute terms. The average actively managed large-cap fund charges over 0.60%, so even SPY investors are getting a bargain. The question is whether you want a good deal or the best deal available.
Fund Structure: Why It Matters More Than You'd Think
VOO is an open-end ETF. SPY is a unit investment trust (UIT). This distinction sounds technical, but it has real consequences.
Dividend handling. When S&P 500 companies pay dividends, VOO receives that cash and immediately reinvests it into the fund's portfolio. SPY, because of its UIT structure, must hold dividends in a non-interest-bearing cash account until the quarterly distribution date. This "cash drag" causes SPY to slightly underperform its index during rising markets. You can see this effect in VOO's dividend history and yield data.
Securities lending. VOO can lend its holdings to short sellers and other institutional borrowers, earning fee income that partially offsets its expense ratio. SPY cannot do this. The lending revenue is small but it's a structural advantage that benefits VOO shareholders.
Tax efficiency. Both ETFs are tax-efficient compared to mutual funds, thanks to the in-kind redemption mechanism that all ETFs share. But VOO has an additional advantage: as a share class of the Vanguard 500 Index Fund, it benefits from Vanguard's patented cross-class tax management, which allows capital losses from mutual fund redemptions to shield the ETF from taxable gains. This patent expired in 2023, and other issuers may eventually replicate this structure, but for now VOO remains one of the most tax-efficient large-cap funds available.
Flexibility for future changes. Because VOO is an open-end ETF, Vanguard can make operational improvements — adjusting index sampling methods, optimizing trade execution, or lowering fees further — without structural barriers. SPY's UIT structure is essentially frozen. Any meaningful change would require creating a new fund and persuading investors to migrate, which is exactly what State Street did when they launched SPLG.
Fund Size and Assets Under Management
SPY manages approximately $580B in assets, while VOO holds approximately $1.51T — nearly three times SPY's size. VOO overtook SPY as the largest S&P 500 ETF in 2023, and the gap has widened since.
Fund size matters for two reasons. First, larger funds generate more revenue at the same expense ratio, which reduces the pressure to raise fees. VOO's $1.51T at 0.03% generates roughly $453M in annual revenue — Vanguard has no incentive to increase that fee. Second, larger funds benefit from economies of scale in operations, trading, and index rebalancing. When the S&P 500 adds or removes a constituent, larger funds can execute the change more efficiently with less market impact.
VOO's rapid asset growth reflects a clear trend: buy-and-hold investors are choosing VOO over SPY. Meanwhile, SPY's trading volume remains dominant, confirming its role as the preferred vehicle for short-term institutional trading. The two funds serve fundamentally different audiences despite tracking the same index.
Liquidity: SPY's One Unbeatable Advantage
SPY is the most heavily traded security in the world. Its average daily dollar volume exceeds $24 billion — roughly 10 times VOO's daily volume. SPY also has the deepest options market of any ETF, with thousands of strike prices and expirations available.
For active traders, hedge funds, and options strategists, this liquidity is worth paying the higher expense ratio. Tighter bid-ask spreads, minimal market impact on large orders, and deep options liquidity all reduce transaction costs for frequent traders.
For long-term investors who buy and hold, SPY's liquidity advantage is irrelevant. VOO's daily volume of ~14.5 million shares and ~$2.3 billion in dollar volume is more than sufficient for any retail investor. Both ETFs have trading spreads that round to 0.00%.
The rule of thumb is simple: if you're holding for years, pick VOO. If you're trading daily or running options strategies, pick SPY.
There's a useful mental model here: think of SPY as a trading instrument and VOO as an investment vehicle. They hold the same stocks, but they're designed for different purposes. A professional day trader cares about options chains, bid-ask spreads on block orders, and intraday liquidity. A retirement saver cares about expense ratios, tax efficiency, and long-term compounding. Both users are rational — they just have different needs.
Dividend Comparison
Both VOO and SPY pay quarterly dividends drawn from the same underlying S&P 500 companies. Because they hold the same stocks, their gross dividend income is nearly identical. The differences come down to yield, timing, and reinvestment.
VOO currently yields approximately 1.20%, while SPY yields approximately 1.18%. The small yield advantage for VOO comes from its fund structure: as discussed above, VOO reinvests dividends immediately upon receipt, which means the fund compounds more efficiently between distribution dates. SPY's cash drag from holding dividends in a non-interest-bearing account slightly reduces its effective yield.
Both funds distribute dividends on similar quarterly schedules, typically in late March, June, September, and December. VOO's most recent dividend was $1.87 per share (ex-date March 27, 2026). For investors focused on dividend income — perhaps building a VOO and chill strategy — the difference between the two funds is minimal, but VOO's structural advantages make it the slightly better income vehicle over time.
For a detailed breakdown of VOO's distribution history and yield trends, see our dividend data page.
Performance Comparison
Because they track the same index, VOO and SPY deliver nearly identical returns before fees. After fees, VOO has a small but persistent edge.
| Period | VOO | SPY | Difference |
|---|---|---|---|
| 2025 | +17.82% | +17.70% | +0.12% VOO |
| 2024 | +24.98% | +24.89% | +0.09% VOO |
| 2023 | +26.32% | +26.19% | +0.13% VOO |
| 2022 | -18.19% | -18.17% | -0.02% SPY |
| 2021 | +28.78% | +28.71% | +0.07% VOO |
| 10Y Ann. | ~13.1% | ~12.9% | ~0.2% VOO |
Returns include dividends. Data as of . Past performance does not guarantee future results. Sources: Vanguard, StockAnalysis.com.
The pattern is consistent: in most years, VOO outperforms SPY by 0.05–0.15%, approximately equal to the fee differential. Over a decade, this compounds into a noticeable gap. Over 30 years, it's substantial.
The lone exception in recent history is 2022, when SPY edged out VOO by 0.02% during a down year. In declining markets, SPY's cash drag actually becomes a minor benefit — holding uninvested cash when stocks are falling slightly cushions the decline. But this is a tiny effect, and the long-term trend overwhelmingly favors VOO.
For investors who care about tracking error — how closely each fund matches the actual S&P 500 Index return — VOO also comes out ahead. VOO's 5-year tracking difference averages about -0.02% (meaning it slightly underperforms the index by its expense ratio), while SPY's tracking difference averages about -0.08%. In practice, VOO delivers more of the index return to shareholders.
Use our VOO returns calculator to model any historical investment period, or see how dividends compound with the dividend income calculator.
Which Should You Buy?
Choose VOO if you are: a buy-and-hold investor with a 5+ year time horizon; cost-conscious and want to minimize fees; investing in a taxable brokerage account (VOO's tax efficiency helps); investing in a Roth IRA, traditional IRA, or 401(k); or starting a new position with no existing SPY holdings. If you're new to index investing, our step-by-step guide to buying VOO walks you through the process.
Choose SPY if you are: an active trader who buys and sells frequently; using options strategies (covered calls, protective puts, spreads); an institutional investor moving large blocks of capital; or already holding SPY in a taxable account with unrealized gains (switching would trigger taxes).
Consider IVV if you are: comparing Vanguard vs BlackRock and want an equivalent product (IVV matches VOO on fees and structure), or investing through a broker that offers iShares commission-free.
One scenario often overlooked: 401(k) investors typically don't have a choice between VOO and SPY. Most employer plans offer either a Vanguard S&P 500 index fund or a Fidelity equivalent like FXAIX, not ETFs directly. If your 401(k) uses Vanguard institutional funds, you're effectively getting the same underlying portfolio as VOO at the same (or even lower) expense ratio. The VOO vs SPY decision is most relevant for taxable brokerage accounts and self-directed IRAs where you pick your own investments.
Should You Switch from SPY to VOO?
This depends on your account type.
In a tax-advantaged account (Roth IRA, Traditional IRA, 401k): Yes, the switch is easy and free. Sell SPY, buy VOO. No tax consequences. You immediately benefit from the lower expense ratio going forward.
In a taxable brokerage account: It's complicated. Selling SPY triggers capital gains taxes on any appreciation. If you have significant unrealized gains, the tax bill from switching could exceed years of fee savings. Run the numbers or consult a tax advisor before switching. A simpler approach: keep existing SPY shares, but direct all new purchases into VOO.
To illustrate: if you hold $200,000 in SPY with $80,000 in unrealized gains, selling triggers roughly $12,000–$18,000 in federal capital gains taxes (depending on your income bracket and how long you've held). The annual fee savings from switching to VOO would be about $120 per year. At that rate, it takes over 100 years for the fee savings to recoup the tax cost. In this scenario, the clear answer is to hold your existing SPY and buy VOO with new money.
For a deeper look at VOO's full holdings and sector breakdown, or to understand how VOO stacks up against the total U.S. stock market through VTI, check those comparison pages.
Frequently Asked Questions
For most long-term investors, yes. VOO charges 0.03% annually compared to SPY's 0.09%, and its open-end fund structure allows dividend reinvestment and securities lending, which slightly improve total returns over time. SPY is better for active traders who need maximum liquidity and deep options markets.
SPY was launched in 1993 as a unit investment trust (UIT), a legal structure that predates modern ETF regulations. This structure imposes higher operating costs and prevents SPY from reinvesting dividends or lending securities. State Street has been unable to convert SPY to a cheaper open-end structure due to legal and contractual constraints.
Yes. Both track the S&P 500 Index and hold essentially the same stocks in the same proportions. The minor differences in holdings count (VOO lists 518, SPY lists 503) are due to how each fund counts dual-class shares.
If you hold SPY in a tax-advantaged account like a Roth IRA, switching is straightforward and the lower expense ratio benefits you immediately. In a taxable account, selling triggers capital gains taxes that could outweigh years of fee savings. For new money, VOO is generally the better choice.
You can, but there's no benefit. They hold the same stocks. Owning both is redundant — you'd be paying a blended expense ratio higher than necessary. Pick one.