Same Index, Three Different Price Tags
SPY, VOO, and IVV all track the exact same thing: the S&P 500 — an index of the 500 largest publicly traded US companies. Their performance charts are essentially identical. On any given day, they move in lockstep.
So why do three versions exist? And more importantly, does it actually matter which one you buy?
The short answer: yes, it matters — but probably less than you think. The differences come down to cost, fund structure, and liquidity. Let me break each one down, and then I’ll tell you which I’d pick and why.
The Quick Comparison
| Feature | SPY | VOO | IVV |
|---|---|---|---|
| Provider | State Street (SPDR) | Vanguard | BlackRock (iShares) |
| Inception | 1993 | 2010 | 2000 |
| Expense Ratio | 0.0945% | 0.03% | 0.03% |
| AUM (Assets) | ~$550 billion | ~$420 billion | ~$480 billion |
| Avg. Daily Volume | ~80M shares | ~5M shares | ~7M shares |
| Structure | Unit Investment Trust | Open-End Fund | Open-End Fund |
| Dividend Reinvestment | ❌ Cash drag | ✅ Automatic | ✅ Automatic |
| Securities Lending | Limited | ✅ Yes | ✅ Yes |
The three numbers that jump out: SPY’s expense ratio is over 3x higher than VOO and IVV, its structure has a quirk that creates “cash drag,” and its daily trading volume is enormous.
Let’s unpack why each of these matters.
SPY — The Original, but Outdated
SPY launched in 1993 as literally the first ETF ever created. It was a groundbreaking financial product that changed investing forever. For that, SPDR (State Street) deserves credit.
But SPY was built on legal architecture from the early ’90s — something called a Unit Investment Trust (UIT). At the time, it was the only available structure. And they’re kind of stuck with it now.
The Cash Drag Problem
Here’s a quirk of SPY’s UIT structure: when companies in the S&P 500 pay dividends, SPY collects that cash but cannot reinvest it until the end of the quarter. That money sits idle, earning nothing, instead of being immediately put to work.
VOO and IVV, structured as Open-End Funds, can reinvest dividends immediately. This difference is called “cash drag,” and it creates a tiny but real performance disadvantage for SPY.
How much does it matter? Over a full year, we’re talking about a handful of basis points. Over 30 years, it compounds into a noticeable gap — maybe a few thousand dollars on a large portfolio. Not life-changing, but also not nothing when there are identical alternatives that don’t have this issue.
Why SPY Still Exists
So if SPY is more expensive and structurally inferior, why does anyone buy it?
One word: liquidity.
SPY trades about 80 million shares per day. VOO trades about 5 million. That 16x difference matters — but mostly for large institutional traders and options traders who need extremely tight bid-ask spreads and massive order fills.
SPY also has the most active options market of any ETF. If you’re trading S&P 500 options, SPY is the tool. No competition.
For a regular investor buying and holding? SPY’s extra liquidity provides zero meaningful benefit. The bid-ask spread on VOO is already just a few cents. You’re not getting a better deal with SPY; you’re just paying a higher expense ratio for liquidity you don’t need.
The Bottom Line on SPY
SPY is a great product that changed the world. It’s now the Blockbuster Video of S&P 500 ETFs. Historically important, still functional, but there are clearly better options for buy-and-hold investors.
Best for: Options traders. Day traders. Institutional investors executing large block trades.
Not ideal for: Long-term buy-and-hold investors. You’re paying 3x the fees for no practical advantage.
VOO — The Cost Champion
Vanguard launched VOO in 2010, and it’s been eating SPY’s lunch ever since. Every year, billions of dollars flow from SPY into VOO — and the reason is simple: same index, one-third the price.
What Makes VOO Special
At 0.03%, VOO is effectively free. On a $100,000 investment, you pay $30 per year. That’s not a typo.
But VOO also benefits from Vanguard’s unique company structure. Vanguard is owned by its funds, which in turn are owned by their shareholders. There are no outside investors or stockholders to pay. This has allowed Vanguard to consistently lower its fees over time, and there’s reason to believe they’ll continue doing so.
The Open-End Fund structure means dividends get reinvested immediately, eliminating the cash drag issue. VOO can also engage in securities lending — lending its shares to short sellers for a fee — which generates a small amount of extra income for the fund.
Any Downsides?
Not many. VOO’s daily trading volume is lower than SPY’s, but at 5 million shares per day, it’s still extremely liquid. The bid-ask spread is negligible for any normal-sized trade.
If you’re an options trader, VOO’s options market is much smaller than SPY’s. But if you’re reading an article called “which S&P 500 ETF should I buy,” you’re probably not trading options.
Best for: Long-term investors. Vanguard loyalists. Anyone who wants the most cost-efficient S&P 500 exposure available.
IVV — The Balanced Choice
iShares (BlackRock) launched IVV in 2000. It matches VOO’s rock-bottom 0.03% expense ratio while offering higher liquidity — about 7 million shares per day versus VOO’s 5 million.
The Case for IVV
IVV is, structurally and economically, nearly identical to VOO. Same expense ratio. Same Open-End Fund structure. Same dividend reinvestment capability. Same S&P 500 tracking.
Where IVV has a slight edge is in securities lending revenue. BlackRock runs the largest securities lending program in the industry, and IVV benefits from that infrastructure. This generates a small amount of extra income that can slightly offset the expense ratio. In some years, IVV’s actual cost to investors (after securities lending income) has been lower than its stated 0.03%.
IVV also has broader availability. If you use Fidelity, Schwab, or virtually any brokerage, you can buy IVV commission-free. The same is true for VOO, but historically IVV has been more universally available across platforms, particularly for institutional investors.
IVV vs. VOO: Does It Matter?
Honestly? The difference between IVV and VOO is approaching the point of irrelevance. They’re essentially the same product wearing different jerseys. Pick the one that’s on your brokerage, or pick the one whose fund company you prefer, and move on.
If you forced me to note a difference: IVV has marginally higher daily trading volume, which means slightly tighter bid-ask spreads. But we’re talking fractions of a penny per share. This matters for hedge funds moving millions of dollars. It does not matter for you.
Best for: Investors at iShares-friendly brokerages. Those who want VOO-level costs with SPY-level liquidity.
The 30-Year Fee Comparison
Let’s put actual dollar amounts on the cost difference. Assume $100,000 invested, 8% average annual returns, over 30 years:
| ETF | Expense Ratio | Total Fees Paid | Final Portfolio |
|---|---|---|---|
| SPY | 0.0945% | $28,500 | $959,000 |
| VOO | 0.03% | $9,200 | $978,300 |
| IVV | 0.03% | $9,200 | $978,300 |
SPY costs you about $19,300 more than VOO or IVV over 30 years. That’s the price of the liquidity premium you don’t need.
On a $50,000 investment, the gap is about $9,650. On $500,000, it’s about $96,500. The bigger your portfolio, the more SPY’s higher fee hurts.
And remember — these three ETFs provide identical exposure. The same 500 companies, the same weights, the same returns (before fees). You’re paying more for the exact same product.
Which One Should You Buy?
Let me give you a straightforward answer:
If you’re a long-term buy-and-hold investor → VOO or IVV
You cannot go wrong with either. They’re functionally identical. Pick the one available at your brokerage or the fund company you prefer.
If you use Vanguard as your brokerage → VOO If you use Fidelity, Schwab, or any other brokerage → IVV (or VOO, both are fine)
If you trade options on the S&P 500 → SPY
SPY’s options market is unmatched. The volume, the spread width, the contract availability — SPY is the only real choice for serious options strategies.
If you already own SPY in a taxable account → Maybe keep it
Selling SPY to buy VOO in a taxable account means realizing capital gains and paying taxes on the sale. If you have large unrealized gains in SPY, the tax hit might outweigh the fee savings — especially if you’re close to the long-term capital gains holding period.
Do the math, or talk to a tax professional. In an IRA or 401(k), there are no tax consequences to switching, so just swap to VOO or IVV.
If you own SPY because your 401(k) only offers it → It’s fine
Some employer 401(k) plans only offer SPY as their S&P 500 option. That’s not ideal, but it’s not the end of the world. SPY at 0.0945% is still cheap by mutual fund standards. Don’t stress about it — focus on contributing as much as you can and getting the employer match.
The Verdict
This isn’t a close call. For buy-and-hold investors, VOO and IVV are clearly superior to SPY. They track the same index, hold the same stocks, deliver the same returns — but at one-third the cost with a better fund structure.
SPY deserves a place in the Hall of Fame for being the ETF that started it all. But nostalgia isn’t a good reason to pay higher fees.
Pick VOO or IVV, set up automatic investing, and direct the savings toward your future instead of toward State Street’s revenue line.
Want to see how SPY, VOO, and IVV break down in your portfolio? Our free ETF Portfolio Analyzer shows you the fee difference in actual dollar amounts.