VOO crossed $1 trillion, charging 3 bps vs SPY's 9.45. Switching saves $65/year per $100k. Taxable gains complicate. SPYM charges 2 bps with thinner liquidity.
The Vanguard S&P 500 ETF crossed $1 trillion in assets on Tuesday, becoming the first exchange-traded fund to reach that milestone. VOO charges 3 basis points for tracking the S&P 500. The older SPDR S&P 500 ETF Trust charges 9.45 basis points for the same index. The gap means a $100,000 position costs $65 more per year in SPY than in VOO, and that difference compounds over time.
SPY launched in January 1993 as a unit investment trust. That structure prevents the fund from reinvesting dividends between distribution dates, leaving cash idle. VOO, organized as an open-end fund, reinvests immediately. The cash drag has historically cost SPY several basis points of tracking performance beyond the headline fee gap, fund filings show.
Both funds hold the same stocks in the same weights. VOO's top holdings mirror SPY's: NVIDIA at 7.58%, Apple at 6.66%, Microsoft at 4.91%, Amazon at 3.64%. Over the past year, VOO returned 23.66%. Over five years, 87.34%. SPY's returns are slightly lower each year due to fees and the dividend timing gap.
State Street, SPY's issuer, launched a cheaper alternative: the SPDR Portfolio S&P 500 ETF. SPYM charges 2 basis points, undercutting even VOO. It holds the identical top-10 lineup and delivered a one-year return of 23.66%. The catch: SPYM holds only about $916 million in assets, a fraction of VOO's scale. Spreads are wider. Options coverage is thin. For a buy-and-hold IRA position, SPYM is the cheapest S&P 500 wrapper available from a major issuer.
Switching inside a tax-advantaged account is simple: sell SPY, buy VOO or SPYM, done. In a taxable account, embedded gains after SPY's five-year unadjusted price return of 74.6% can trigger a capital gains bill that erases years of future fee savings. Options traders lose depth when moving from SPY to either alternative. SPYM's smaller asset base adds trading friction.
For long-term holders in retirement accounts, moving from SPY to VOO captures the fee gap and the dividend-reinvestment advantage with no meaningful loss. For the most cost-sensitive holders willing to accept thinner liquidity, SPYM is cheaper still. Active traders using SPY as an options underlying retain the liquidity and options-depth advantages of holding SPY. The reason to reconsider the position is the 9.45-basis-point ceiling on SPY, versus 3 basis points on VOO and 2 on SPYM.
The SPY ETF carries an AlphaScala score of 38 out of 100, reflecting mixed sentiment. The top holdings, NVIDIA and Microsoft, score 78 and 73 respectively, indicating stronger momentum.
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