SPY vs VOO 2026: Which S&P 500 ETF Should You Actually Own?
SPY and VOO both track the S&P 500. Same 500 companies, same weights, same daily moves within a rounding error. Yet SPY's expense ratio is more than three times VOO's, and volume is almost ten times higher. Here is exactly when each one wins, and how to pick without over-thinking it.
What each ETF actually tracks
SPY (SPDR S&P 500 ETF Trust) launched in 1993 and was the very first US-listed ETF. It tracks the S&P 500 index and holds roughly 503 large-cap US stocks weighted by market capitalization. It is issued by State Street and structured as a Unit Investment Trust (UIT), which matters for a couple of subtle reasons we get to below.
VOO (Vanguard S&P 500 ETF) launched in 2010 and tracks the exact same index with the exact same holdings. It is issued by Vanguard and structured as an open-end fund, which is the modern default. Same 500 stocks, same weights, same reconstitution schedule as SPY.
Head-to-head: the numbers that actually matter
| Metric | SPY | VOO |
|---|---|---|
| Issuer | State Street | Vanguard |
| Launched | 1993 | 2010 |
| Index tracked | S&P 500 | S&P 500 |
| Holdings | ~503 | ~503 |
| Expense ratio | 0.0945% | 0.03% |
| 30-day SEC yield (2026) | ~1.28% | ~1.30% |
| Assets under management | $620B+ | $580B+ |
| Average daily volume | ~70M shares | ~7M shares |
| Bid-ask spread (typical) | <0.5 bps | ~1 bp |
| Options market | Deepest in the world | Actively traded |
| Fund structure | Unit Investment Trust | Open-end fund |
| Dividend reinvestment inside fund | No | Yes |
Why SPY costs more (and why it still exists)
SPY was launched as a Unit Investment Trust in 1993 because that was the only ETF wrapper the SEC had approved. UITs cannot reinvest dividends internally or lend out securities, so they lose two revenue levers that modern open-end ETFs like VOO use to subsidize fees. State Street has never re-launched SPY in a modern wrapper because doing so would trigger a capital gains distribution that would obliterate decades of tax-deferred appreciation for existing holders.
The upside of SPY's age and size is unmatched liquidity. It is the most heavily traded security on the planet, its options market is deeper than any other equity ETF, and institutional traders can move nine-figure positions without moving the price. For a long-term buy-and-hold retail investor, none of that matters. For active traders, hedgers, and options sellers, it matters a lot.
Who each one is actually for
Choose VOO if
- You are buying and holding for years or decades
- You want the lowest expense ratio available on the S&P 500
- You want dividends automatically reinvested inside the fund via DRIP
- You are dollar-cost averaging with monthly contributions
- You care about long-term after-fee returns above all else
Choose SPY if
- You trade actively or use short holding periods
- You sell covered calls or trade options on the S&P 500
- You need to move large blocks without market impact
- You use it as a hedging instrument in a broader trading book
- You already own SPY with big embedded gains (do not switch, do not create a tax event)
The dividend reinvestment trap
Because SPY is a UIT, it must hold dividends received from its underlying holdings in cash until the quarterly distribution date. VOO, as an open-end fund, can reinvest those dividends into more shares immediately. During a rising market this creates a small but persistent tracking drag for SPY of roughly 1 to 3 basis points per year on top of the fee gap. It is not enormous, but it is real, and it stacks on top of the expense ratio difference.
What about IVV, the third option?
iShares' IVV (Core S&P 500 ETF) is BlackRock's equivalent and it charges the same 0.03% as VOO. IVV is structured as an open-end fund like VOO, offers internal dividend reinvestment, and holds the same underlying index. For a buy-and-hold investor picking today with no legacy position, VOO and IVV are essentially interchangeable and the choice between them usually comes down to which brokerage platform you use.
Order of operations for picking your S&P 500 ETF
- Are you actively trading options or short-term positions? Choose SPY for liquidity.
- Do you already hold SPY with material gains in a taxable account? Keep it, do not create a tax event.
- Everyone else: choose VOO or IVV for the lower expense ratio and internal dividend reinvestment.
- Only own the S&P 500? Consider adding VXUS (international) and BND (bonds) to build a three-fund portfolio.
How this fits inside a real portfolio
The S&P 500 covers about 80 percent of US market cap but ignores mid and small caps entirely, and skips international markets. For a complete portfolio, most investors pair VOO with a total international ETF (VXUS) and a bond allocation (BND). If you want US mid and small caps included in one fund, VTI is the total-market alternative to VOO. See our VTI vs VOO breakdown for that decision, and our three-fund portfolio guide for how to combine them.
Frequently asked questions
Is VOO really better than SPY?
For a long-term buy-and-hold retail investor, yes. VOO charges 0.03% versus SPY at 0.0945%, and its open-end structure lets it reinvest dividends internally, which adds another small tracking advantage. For active options traders and institutional block trading, SPY still wins on liquidity.
Should I sell my SPY to buy VOO?
Only inside a tax-sheltered account (IRA, Roth IRA, 401k) where there is no tax consequence. In a taxable account, the capital gains tax on your embedded profits will far exceed decades of future fee savings. Hold SPY, direct new contributions to VOO instead.
Do SPY and VOO pay the same dividends?
Yields are essentially identical because both hold the same underlying stocks. In 2026 both trail at roughly 1.28 to 1.30 percent SEC yield. Small differences come from timing of distributions and cash drag inside SPY.
Which has better options liquidity, SPY or VOO?
SPY, by a wide margin. It is the most actively traded security in the world and its options chain has tighter spreads across almost every strike and expiry. If you sell covered calls or trade options at all, use SPY.
Is IVV the same as VOO?
For practical purposes, yes. Both charge 0.03%, both are open-end funds, both track the S&P 500, both reinvest dividends internally. The only real difference is the issuer (iShares/BlackRock for IVV, Vanguard for VOO). Pick whichever your broker offers commission-free.
Can I hold VOO in my Roth IRA?
Yes, and it is one of the most common Roth IRA holdings in the US. All growth and qualified withdrawals are tax-free, and VOO's low fee compounds especially well over long horizons. See our Roth vs Traditional guide for context on which account to fill first.