By WealthIQ Editorial | Last Updated: March 2026
Executive Summary
- Both SPY and full VOO ETF review track the S&P 500 index — they hold the same 503 stocks
- SPY charges 0.0945% per year; VOO charges just 0.03% — a 3× cost difference
- SPY trades ~$30 billion daily, making it the world’s most liquid ETF — ideal for traders
- Long-term investors keeping shares for years will likely come out ahead with VOO or IVV
Bottom line: If you’re a buy-and-hold investor, VOO wins on cost. If you trade frequently or use options, SPY’s liquidity justifies the slightly higher fee.
The Setup: Same Index, Different Wrappers
The S&P 500 is the gold standard of U.S. equity benchmarks — 503 large-cap stocks representing roughly 80% of total U.S. market capitalization. When investors want broad U.S. exposure, they reach for one of three giants: SPY, VOO, or IVV. All three track the same index. All three deliver virtually identical long-term returns before fees. The differences that matter are expense ratio, liquidity, and tax efficiency.
Related: VTI review.
Expense Ratio: Where the Real Gap Lives
SPY is managed by State Street Global Advisors and launched in 1993 — the first U.S.-listed ETF. Its expense ratio is 0.0945%. VOO, launched by Vanguard in 2010, charges 0.03%. IVV from BlackRock charges 0.03% as well.
On a $10,000 investment held for 20 years growing at 8% annually:
- VOO (0.03%): ~$45,762 ending value
- SPY (0.0945%): ~$45,427 ending value
- Difference: ~$335 over 20 years — not catastrophic, but real
At larger balances — say, $100,000 — that gap widens to roughly $3,350 over two decades. Pure buy-and-hold investors are paying a premium they don’t need to pay.
Liquidity: SPY Is in a League of Its Own
SPY’s average daily trading volume exceeds $30 billion. For comparison, VOO averages around $1–2 billion per day. This matters for three types of investors:
- Traders: SPY’s bid-ask spreads are typically $0.01 — essentially free to trade. VOO spreads can widen slightly during volatility.
- Options traders: SPY has one of the deepest options markets on Earth. Open interest in SPY options dwarfs VOO by 100:1 or more. If you use covered calls, protective puts, or any options strategy, SPY is the only real choice.
- Institutional investors: Large funds moving hundreds of millions can enter or exit SPY positions without moving the market. VOO’s lower volume would create slippage at scale.
Tax Efficiency: A Technical Edge for VOO
Vanguard holds a now-expired patent that allowed its ETF share class to use mutual fund redemptions to purge low-cost-basis shares — reducing capital gains distributions. While the patent expired in 2023, Vanguard’s fund structure still gives VOO a structural advantage in tax efficiency.
SPY is structured as a Unit Investment Trust (UIT), an older legal structure. UITs cannot reinvest dividends intra-fund, which creates minor cash drag and slightly less tax optimization versus modern ETF structures. For taxable accounts, this matters at the margin.
Dividend Handling
SPY, as a UIT, must hold dividends in cash until the quarterly distribution date — causing slight cash drag. VOO can immediately reinvest dividends, which is marginally more efficient. Over long time horizons, this is a small but real advantage for VOO.
SPY vs VOO vs IVV: Quick Comparison
| Feature | SPY | VOO | IVV |
|---|---|---|---|
| Expense Ratio | 0.0945% | 0.03% | 0.03% |
| AUM | ~$590B | ~$550B | ~$490B |
| Avg Daily Volume | ~$30B | ~$1.5B | ~$1.5B |
| Options Market | Extremely deep | Moderate | Moderate |
| Legal Structure | Unit Investment Trust | Open-End Fund | Open-End Fund |
| Best For | Traders, options | Long-term holders | Long-term holders |
The Verdict: Which Should You Buy?
Buy VOO if: You’re a long-term investor (10+ year horizon), you’re investing in a taxable account, you don’t trade options, and you want to minimize costs. The 0.03% expense ratio is among the lowest in the entire ETF universe.
Buy SPY if: You actively trade, you use options strategies like covered calls or protective puts, you need maximum liquidity for large trades, or you’re an institution. The extra cost (roughly 0.065% per year) is real but justified by the functionality.
IVV is underrated: Offered by iShares (BlackRock), IVV matches VOO’s low 0.03% expense ratio and has better liquidity than VOO. For investors at TD Ameritrade (now Schwab) or those who prefer BlackRock’s reporting, IVV is an excellent VOO alternative.
What About Returns?
Because all three funds track the same index, their gross returns are almost identical. After fees, VOO and IVV edge out SPY by roughly 0.065% per year. On a $50,000 portfolio over 30 years, that compounds to roughly $5,000–$8,000 in extra wealth — purely from lower fees. This is the power of compounding working in reverse when costs are higher.
Bottom Line
The SPY vs VOO debate isn’t really a debate — it’s a question of use case. Long-term, passive investors should default to VOO (or IVV) for the lower cost and superior tax structure. Active traders and options strategists should stick with SPY for its unrivaled liquidity. Either way, you’re getting the same underlying S&P 500 exposure that has delivered roughly 10% annualized returns over the past century.