VOO and IVV are usually the simpler low-cost choices for long-term S&P 500 investing, while SPY is especially useful for investors who trade frequently or use options. All three exchange-traded funds (ETFs) track the same index, so their underlying stock exposure is very similar. The main differences are annual fees, fund structure, and trading liquidity, not which companies they are trying to own.
For a US investor building a diversified portfolio, choosing between these funds is important, but deciding how much to invest in US large-cap stocks matters even more.
What Do VOO, IVV, and SPY Actually Own?
Each ETF seeks to follow the S&P 500, an index of 500 leading US large-cap companies. According to S&P Dow Jones Indices, the index covers roughly 80% of the available market capitalization of US equities.
The S&P 500 is float-adjusted market-cap weighted: companies with more valuable publicly available shares receive larger weights. That means a few mega-cap companies can exert a substantial influence on index returns. Owning 500 companies is not the same as giving each company an equal share of your investment.
VOO, IVV, and SPY therefore tend to rise and fall together. Buying all three does not create meaningful additional diversification because their holdings substantially overlap.
VOO vs. IVV vs. SPY: Side-by-Side Comparison
| Feature | VOO | IVV | SPY |
|---|---|---|---|
| Full name | Vanguard S&P 500 ETF | iShares Core S&P 500 ETF | State Street SPDR S&P 500 ETF Trust |
| Provider | Vanguard | BlackRock / iShares | State Street / SPDR |
| Launch year | 2010 | 2000 | 1993 |
| Index tracked | S&P 500 | S&P 500 | S&P 500 |
| Annual expense ratio | 0.03% | 0.03% | 0.0945% |
| Annual fund cost per $10,000 | $3.00 | $3.00 | $9.45 |
| Legal structure | Open-end fund ETF | Open-end fund ETF | Unit investment trust |
| Distributions | Generally quarterly | Generally quarterly | Generally quarterly |
| Typical appeal | Long-term, low-cost exposure | Long-term, low-cost exposure | Very active trading and options |
Fund facts and stated expense ratios checked against Vanguard, iShares, and State Street, as of November 7, 2026. Fees and other fund characteristics can change.
Which ETF Has the Lowest Fees?
VOO and IVV are tied on their stated expense ratios at 0.03% per year. SPY charges 0.0945%. An expense ratio is the percentage of fund assets used to cover ongoing operating costs. It is reflected in fund performance rather than appearing as a separate annual bill from your brokerage.
The difference between SPY and either low-cost competitor is 0.0645 percentage points, or 6.45 basis points. For a hypothetical account balance that stays at $100,000 for a full year, that is approximately $64.50 in additional annual fund expenses. Expenses in dollars vary as your balance changes.
Worked example: How fees can compound over 20 years
Assume you invest $10,000 once, with no additional contributions, and all three funds earn the same hypothetical 7% annual gross return before fund expenses. For simplicity, subtract the constant annual expense ratio from the gross return once a year, then compound. Ignore trading costs, taxes, cash drag, and tracking differences.
Variables and units: starting investment = $10,000; gross annual return = 7%; annual fee = 0.03% for VOO/IVV or 0.0945% for SPY; investment period = 20 years.
Formula: Future value = $10,000 × (1 + 0.07 − annual expense ratio)^20.
| Hypothetical outcome after 20 years | VOO or IVV | SPY |
|---|---|---|
| Assumed net annual return | 6.9700% | 6.9055% |
| Projected ending value | $38,480 | $38,019 |
| Difference relative to VOO or IVV | — | −$461 |
The example illustrates that small fee differences can accumulate. It is not a prediction of future ETF returns. Actual fund performance also depends on investment returns, tracking error, distributions, trading expenses, taxes, and any changes in fees. The SEC explains how investment fees affect returns.
Why Do Traders Often Prefer SPY?
SPY launched in 1993 and developed a deep secondary market and options ecosystem. It is widely used by institutions and active traders seeking exposure to, or hedges against, the S&P 500. Its greater trading activity can be valuable when placing large or frequent orders.
But trading volume is not the same as total trading cost. Investors should check the bid-ask spread (the difference between the highest price a buyer offers and the lowest price a seller accepts), commissions, the quoted price relative to net asset value (NAV), and how quickly an order can be filled. VOO and IVV are also highly liquid ETFs for ordinary buy-and-hold investing.
If you intend to hold shares for decades, SPY’s options market may offer you no practical benefit. If you trade frequently, a narrower effective spread or better execution may offset some of its higher ongoing fees. The answer depends on your actual trading activity, not a universal ranking.
Does Fund Structure Change Returns or Dividends?
VOO and IVV are open-end ETFs; SPY is a unit investment trust (UIT). These structures have different operational rules. SPY’s trust cannot reinvest the dividends received from companies into more stocks inside the fund in the same way that an open-end ETF may. This can produce a modest cash drag between dividend receipt and distribution, depending on market conditions.
This internal fund-level treatment is different from your brokerage reinvesting a dividend distribution. A broker may allow you to enroll your ETF position in a dividend reinvestment plan (DRIP), including SPY, which buys more ETF shares after the payment reaches your account. Each of the three funds typically distributes income quarterly; the amount is variable and not guaranteed. SPY’s 2026 prospectus describes its structure and distribution arrangements.
There can also be small variations in securities lending, implementation, and tracking. None changes the basic fact that the three funds offer very similar exposure to the S&P 500.
What About Taxes, Tracking Error, and Share Price?
In a US taxable brokerage account, dividend distributions generally can create taxable income, and selling ETF shares at a gain can create capital gains taxes. ETFs may be relatively tax-efficient because they can use in-kind share creation and redemption, but capital gains distributions and other tax costs remain possible. In tax-advantaged accounts such as an IRA or 401(k), tax treatment differs. See the SEC’s ETF investor guidance.
Tracking difference measures how much an ETF’s return deviates from the index over a specified period, after fees and portfolio effects. Compare funds on the same dates, using the same total-return convention and whether prices or NAV are being measured. A share’s dollar price does not tell you which ETF is cheaper or better: a higher-priced share is not automatically a more expensive investment in economic terms.
Are S&P 500 ETFs Diversified Enough?
They diversify across many US large-cap companies, but not across every source of portfolio risk. They do not directly provide meaningful exposure to international stocks, US small-cap stocks, or bonds. Because the S&P 500 weights holdings by market capitalization, its largest companies can dominate its movements.
A fall in mega-cap technology valuations can therefore affect all three ETFs simultaneously. Macroeconomic changes, including inflation and interest-rate surprises, may also affect their underlying stocks. Our guide to how inflation moves the Nasdaq and tech stocks explains one important valuation channel.
To broaden diversification, investors can evaluate how an S&P 500 ETF fits alongside international equity, smaller companies, and fixed income, based on their time horizon and risk tolerance. An ETF is a building block, not automatically a complete investment plan.
How to Choose Between VOO, IVV, and SPY
- For a long-term core allocation: compare VOO and IVV first. Their stated fees are the same, and their market exposure is nearly identical. Brokerage availability, fractional-share purchases, and execution costs may decide the choice.
- For frequent trading or options strategies: investigate SPY’s execution quality, depth, and options liquidity, but compare those benefits against its higher expense ratio and the risks of active trading.
- For regular monthly investing: prioritize consistent contributions, suitable asset allocation, and low transaction costs over minor differences between funds tracking the same benchmark.
- For an existing holding: consider possible capital gains taxes and other costs before selling one ETF simply to switch to another. The benefit may not justify the transaction.
Investors who want to analyze the businesses inside the index can also use our guide to reading quarterly earnings reports and identifying red flags. That approach complements, rather than replaces, broad index investing.
Frequently Asked Questions
Is VOO better than IVV?
Neither has a clear structural cost advantage based on the published 0.03% expense ratios. For most long-term investors, the practical difference will be small. Compare availability, execution, taxes, and the fund’s published tracking results rather than assuming one ticker is universally superior.
Why does SPY charge more?
SPY is an older UIT with a different operating structure and a strong active-trading ecosystem. Its 0.0945% expense ratio is higher than VOO’s and IVV’s current 0.03% rates. That premium may be worthwhile for a specific trading use case, but generally provides little benefit to a passive investor.
Should I buy VOO, IVV, and SPY together?
Usually there is little diversification benefit. They follow the same index and hold substantially the same stocks. Holding several share classes or funds with nearly identical exposures does not remove the concentration and market risks of the underlying index.
Are VOO, IVV, and SPY safe investments?
They are regulated investment funds offering broad US large-cap stock exposure, but none protects your principal against stock-market declines. All can suffer significant losses during a bear market, and past performance does not guarantee future results.
Bottom Line
Choose VOO or IVV primarily for cost-efficient long-term S&P 500 exposure; evaluate SPY when trading liquidity or options are central to your strategy. The difference in fund fees is measurable, but asset allocation, saving discipline, investment horizon, and risk management can have a much larger impact on your financial outcome.
This article is educational information for US readers, not personalized investment or tax advice. Fund data were checked November 7, 2026, and should be verified before any investment decision.