🥊The Ultimate S&P 500 ETF Showdown: SPY vs. VOO vs. IVV

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Welcome to the ETF UNO weekend reading corner! Grab your coffee, and let's dive into the exciting world of S&P 500 ETFs. We'll explore three high-volume, well-managed ETFs and uncover some intriguing differences that are often overlooked. It's going to be a fantastic journey of discovery together!

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🌟The S&P 500: America's Stock Market All-Star Team

Imagine creating the ultimate business team by selecting 500 companies that highlight the economic strength of the United States. This is what the S&P 500 does, effectively curating a list of 500 leading publicly traded companies since 1957. These companies collectively represent about 80% of the total U.S. market capitalisation, making the S&P 500 the VIP section of American capitalism.

Getting into the S&P 500 isn't like signing up for a gym membership. Companies must meet strict criteria: they need a market capitalisation of at least $20 billion, positive earnings in both the most recent quarter and over the past four quarters and must be properly listed on a major U.S. exchange. The selection process is handled by a committee at S&P Dow Jones Indices rather than a formula, which means that both art and science are involved in these decisions. Companies must also file 10-K annual reports with the SEC and have a "plurality" of assets and revenue in the United States. It's like an exclusive country club where the membership committee takes their job very seriously.

S&P 500 ETFs offer a convenient way to invest in American business excellence with a single purchase. Instead of trying to select individual winners, you simply opt for a small share of all the big winners. For many starting investors, an S&P 500 ETF is an ideal foundation. It’s diversified, liquid, and has historically performed well. Over the past decade, the S&P 500 has achieved an impressive 233% return, despite global challenges and market fluctuations.

🏆The Heavyweights of S&P 500 Tracking

Here's where it gets interesting. While many ETFs track the S&P 500, three giants stand out like Manhattan skyscrapers. Let's meet our contenders:

• SPDR S&P 500 ETF Trust (SPY) is often regarded as the "grandfather" of ETFs, having been launched in 1993 as the first U.S.-listed ETF. Its long-standing leadership has made it a go-to choice for many investors, reminiscent of the saying, "Nobody ever questioned buying SPY."

• Vanguard S&P 500 ETF (VOO) reflects Vanguard's commitment to low costs and investor focus. While SPY is the established veteran, VOO emerged as a more efficient and cheaper alternative. In February 2025, VOO surpassed SPY to become the world's largest ETF, marking a notable victory for the underdog in the market.

• iShares Core S&P 500 ETF (IVV) is managed by BlackRock, the world's largest asset manager. IVV also surpassed SPY in March 2025, relegating the once-dominant ETF to third place. If this were a horse race, IVV would be the dark horse that quietly moved up from the outside lane to challenge for the lead.

Let's roll up our sleeves and examine what matters when choosing between these three titans:

• 💵Expense Ratios: The difference between 0.03% and 0.09% may seem small, but these fees can add up. For every $10,000 invested, the annual fees are $3 and $9.45. Over decades, this can result in savings of thousands of dollars.

  • SPY: 0.09%

  • VOO: 0.03%

  • IVV: 0.03%

• 🔄Trading Volume: SPY's trading volume is much higher than both VOO and IVV on a daily average.

• 📊Structural Differences: SPY can be thought of as having its hands tied behind its back due to its older structure as a Unit Investment Trust (UIT), which prevents it from reinvesting dividends or lending securities to generate extra income. In contrast, VOO and IVV have greater flexibility to optimise returns; they can reinvest dividends in the index until paid out quarterly and can lend shares to earn additional returns.

• 📉Tax Efficiency: SPY is less tax-efficient due to its UIT structure and inability to do in-kind redemptions as flexibly. While VOO and IVV are more tax-efficient thanks to their open-end structure and in-kind creation/redemption mechanisms

• 🎯Performance Tracking: The tracking accuracy varies. SPY has a slight tracking error due to its higher expense ratio. VOO offers better accuracy with lower fees and a tax-efficient structure. IVV closely replicates the S&P 500's weight, providing returns very close to the actual index.

• 📢Holdings and Updates: SPY and IVV report their holdings daily and VOO reports holding updates monthly.

Best Use Cases: When to Choose Which

• SPY: Perfect for active traders, options strategies, and those who need maximum liquidity for quick in-and-out trades

• VOO: Ideal for buy-and-hold investors who prioritise low costs and long-term growth

• IVV: Most enticing for long-term investors seeking the closest possible replication of S&P 500 returns

🗺️The Complete Guide to S&P 500's Big Three

We hope you've enjoyed this overview of S&P 500 ETFs! Although SPY, VOO, and IVV have subtle differences, choosing any of them is a smart way to invest in America's top companies. The key takeaway is that for most investors, starting to invest is more important than the differences between these ETFs. Pick one and start investing consistently. The market rewards patience and persistence far more than it rewards perfect product selection.

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DISCLAIMER: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research and consider consulting with a financial advisor before making investment decisions.