VOO vs SPY ETFs: Key Differences to Know Before You Invest

If you’ve been looking at ways to invest in the U.S. stock market without picking individual stocks, chances are you’ve come across two popular exchange-traded funds (ETFs):

VOO vs SPY

Both of these funds give you broad exposure to the largest companies in the United States, tracking the performance of the S&P 500 index. They look almost identical on the surface—same top holdings, similar returns, and both are favorites of long-term investors.

But like most investment decisions, the primary differences lie in the details: expense ratios, trading volume, tax efficiency, and investor base.

Understanding these subtle differences can help you decide which is the better choice for your personal goals and long-term strategy.

In this article, we’ll do a side-by-side ETF comparison of VOO vs SPY—covering costs, performance, dividends, liquidity, and more—so you can choose the best ETF for your portfolio.

---

---

What Are VOO and SPY?

Before diving into the details, let’s start with a simple comparison of these two investment vehicles.

VOO (Vanguard S&P 500 ETF)

• Issuer: Vanguard

• Launched: 2010

• Structure: Open-ended ETF

• Expense Ratio: 0.03% (low expense ratio)

• Assets Under Management: ~$300 billion

SPY (SPDR S&P 500 ETF Trust)

• Issuer: State Street Global Advisors

• Launched: 1993 (the first ETF in the U.S.)

• Structure: Unit Investment Trust (UIT structure)

• Expense Ratio: 0.09%

• Assets Under Management: ~$400 billion (one of the largest ETFs in the world)

Both funds are designed to track the performance of the S&P 500 index, which includes 500 large-cap stocks representing the largest companies in the U.S. stock market.

That means whether you buy VOO or SPY, you instantly get a slice of household names like Apple, Microsoft, Amazon, and Google.

Expense Ratios & Costs

One of the most important factors when comparing index ETFs is the expense ratio—the annual fee you pay to the fund manager.

• VOO Costs: 0.03%

• SPY Costs: 0.09%

At first glance, the difference looks small—just 0.06%. But over long periods, that extra cost compounds.

• On a $100,000 investment:

  • VOO’s annual fee = $30

  • SPY’s annual fee = $90

That $60 difference per year may not sound like much, but over 20–30 years of compounding, it can eat into your total return. For cost-conscious investors, especially those planning to hold for the long run, VOO’s low-cost index fund advantage is clear.

Verdict: VOO is the winner for long-term goals because of its lower fees.

Liquidity, Trading Volume & Bid-Ask Spreads

For active traders, liquidity and trading costs matter just as much as the annual fee.

• SPY Liquidity

  • Average Daily Trading Volume: 70+ million shares (extremely high trading volume)

  • Bid-Ask Spread: Razor thin (fractions of a cent)

  • Benefit: High liquidity makes SPY ideal for short-term traders or large block trades.

• VOO Liquidity

  • Average Daily Trading Volume: ~2 million shares

  • Bid-Ask Spread: 1–2 cents

  • Benefit: Plenty for retail investors and long-term investors, but slightly less efficient for active traders.

Verdict: If you’re a day trader or institutional investor making frequent moves, SPY’s higher daily trading volumes give it the slight edge. For buy-and-hold investors, VOO’s liquidity is more than enough.

Dividend Yields & Distributions

Both ETFs pay dividends from the underlying companies in the S&P 500.

• VOO Dividend Yield: ~1.4%

• SPY Dividend Yield: ~1.5%

The primary difference is small—SPY tends to offer slightly higher dividend yields, but at the cost of higher fees. Both pay quarterly distributions, and most are qualified dividends, meaning they’re taxed at lower long-term capital gains rates.

Verdict: SPY gives a tiny bump in dividend yield, but cost-conscious investors often prefer VOO for its low expense ratio.

Join the Passive Investors Circle

Tax Efficiency & Structure

One often overlooked factor in the VOO vs SPY debate is tax efficiency.

• VOO

  • Uses Vanguard’s unique ETF structure

  • Tends to have lower capital gains distributions

  • Added benefit of low turnover

  • More tax-efficient for investors in taxable accounts

• SPY

  • Structured as a Unit Investment Trust (UIT)

  • Can generate higher capital gains distributions

  • Slightly less tax efficient than VOO

Verdict: VOO’s structure gives it the edge for tax efficiency and net returns on a risk-adjusted basis relative to SPY.

Past Performance & Tracking Error

On a performance of the S&P 500 index basis, both funds deliver similar returns.

• Over the long run, differences in annual returns between the two are measured in fractions of a percent.

• VOO tends to have slightly lower tracking error, which means it mirrors the index a bit more closely.

For example:

• VOO Annual Returns: Closely tracks S&P 500

• SPY Annual Returns: Nearly identical, with minor variations

Verdict: Both deliver similar returns, but VOO’s low expense ratio may give it a slight edge over long periods.

Fund Size & Popularity

• SPY

  • Assets: $400+ billion

  • The largest ETF globally

  • Extremely popular among institutional investors and active traders

• VOO

  • Assets: $300+ billion

  • Rapidly growing due to its low fees

  • Popular among retail investors and long-term investors focused on growth

Verdict: SPY has history and size on its side, but VOO is catching up quickly as the preferred low-cost option for long-term growth.

Which Is Better: VOO vs SPY?

Feature	VOO	SPY
Best For	Long-term investors seeking low fees and growth	Active traders needing high liquidity and fast execution
Expense Ratio	0.03%	0.09%
Tax Efficiency	Higher	Slightly lower
Liquidity	High	Very high (one of the most traded ETFs)
Trading Volume	Lower	Higher
Options Availability	Available, but less liquid	Highly active options market
Issuer	Vanguard	State Street
Dividend Frequency	Quarterly	Quarterly
Share Price Behavior	Typically priced lower per share	Typically priced higher per share

Both ETFs provide broad exposure to the US equity market, tracking the same primary U.S. stock market index. The main difference comes down to cost vs liquidity.

As Warren Buffett, the often-quoted billionaire CEO of Berkshire Hathaway, has said: “A low-cost index fund is the best investment for most people.”

On that basis, many financial advisors and cost-conscious investors would argue VOO is the better choice for the long run.

Final Thoughts

Both VOO and SPY are excellent investment vehicles that track the S&P 500 index—a benchmark that has delivered strong long-term growth in the U.S. stock market.

• For retail investors building wealth with a brokerage account or retirement account, VOO’s lower expense ratio is the key factor that gives it the win.

• For short-term traders or those needing high trading volume, SPY remains the go-to ETF.

At the end of the day, your risk tolerance, investment strategy, and personal goals matter more than small differences. Both funds offer broad exposure to large-cap stocks and are among the best ETFs available today.

---

---

Disclaimer: This article is for informational purposes only. Investment strategies should be chosen based on your own long-term goals, risk tolerance, with the advice of a licensed financial advisor.