SPY vs VOO vs IVV: The Ultimate S&P 500 ETF Comparison for 2026

Why S&P 500 ETFs?

The S&P 500 is the benchmark for American capitalism. It captures about 80% of U.S. stock market capitalization in 500 of the largest, most profitable companies in the world. Apple, Microsoft, Amazon, NVIDIA, Google, Meta, Berkshire Hathaway - they're all in there.

For most investors, owning the S&P 500 is the core of their equity allocation. Warren Buffett famously told his wife to put 90% of her inheritance in an S&P 500 index fund. Jack Bogle built Vanguard on the idea that most people should just own the market.

The question isn't whether to own the S&P 500. The question is which ETF to use to own it.

The Case for Index Investing

Time Period	% of Active Funds Beaten by S&P 500	Data Source
1 Year	64%	SPIVA 2025
5 Years	79%	SPIVA 2025
10 Years	86%	SPIVA 2025
15 Years	92%	SPIVA 2025
20 Years	95%	SPIVA 2025

The numbers don't lie. Over long periods, nearly all active managers fail to beat the index after fees. That's why low-cost index funds have attracted trillions in assets.

The Big Three: SPY, VOO, IVV

Three ETFs dominate S&P 500 investing, and together they hold over $1.5 trillion in assets. They all track the same index, but they're not identical.

Quick Overview

Feature	SPY	VOO	IVV
Provider	State Street (SPDR)	Vanguard	BlackRock (iShares)
Inception	January 1993	September 2010	May 2000
Expense Ratio	0.0945%	0.03%	0.03%
AUM (Approx.)	$550 Billion	$480 Billion	$500 Billion
Structure	Unit Investment Trust	Open-End Fund	Open-End Fund
Average Daily Volume	~70 million shares	~5 million shares	~5 million shares
Dividend Frequency	Quarterly	Quarterly	Quarterly

SPY: The Original

SPY was the first ETF ever listed in the United States. Launched in 1993, it revolutionized investing by giving ordinary investors cheap, liquid access to the entire S&P 500 in a single trade.

SPY is structured as a Unit Investment Trust (UIT), which is an older legal structure. This has some quirks:

Cannot reinvest dividends: Dividends are held in cash until distribution, causing slight performance drag
Cannot lend securities: No additional income from securities lending (VOO and IVV can and do)
Cannot hold derivatives: Can't use futures for efficient cash management

Despite these disadvantages, SPY remains wildly popular because of its unmatched liquidity. For traders, options players, and institutions moving large amounts quickly, SPY is the only game in town.

VOO: The Low-Cost Leader

Vanguard launched VOO in 2010, and it quickly became the choice for cost-conscious long-term investors. At 0.03% expense ratio, you pay just $3 per year for every $10,000 invested.

VOO benefits from Vanguard's unique ownership structure. Vanguard is owned by its funds, which are owned by their investors. There's no outside shareholders demanding profits, so Vanguard can pass all economies of scale to investors as lower fees.

IVV: The iShares Contender

BlackRock's iShares launched IVV in 2000, and it matches VOO's 0.03% expense ratio. IVV is essentially identical to VOO in structure and costs, making the choice between them largely a matter of preference or existing brokerage relationships.

Expense Ratio Deep Dive

The expense ratio is the annual fee charged by the fund, expressed as a percentage of assets. It's deducted daily from the fund's NAV, so you never see a bill - it just slightly reduces your returns.

Cost Comparison Over Time

Investment Amount	Time Period	SPY Cost (0.0945%)	VOO/IVV Cost (0.03%)	Savings
$10,000	1 Year	$9.45	$3.00	$6.45
$10,000	10 Years	$95	$30	$65
$100,000	10 Years	$945	$300	$645
$100,000	30 Years	$2,835	$900	$1,935
$500,000	30 Years	$14,175	$4,500	$9,675

These are simple calculations that don't account for compounding. In reality, the savings are even larger because the money you don't pay in fees stays invested and grows.

At 0.03%, VOO and IVV are among the cheapest equity funds in existence. You literally cannot get cheaper exposure to 500 of the world's best companies.

Why SPY Costs More

SPY's higher expense ratio (0.0945% vs 0.03%) exists for several reasons:

Legacy structure: The UIT structure from 1993 is less efficient
No incentive to cut: Traders don't care about 0.06% annually - they care about liquidity
Marketing costs: SPY spends more on institutional marketing and distribution
State Street profits: Unlike Vanguard, State Street has shareholders demanding returns

Liquidity and Trading Costs

For long-term investors, expense ratio is everything. For active traders, liquidity matters more.

Trading Metrics Comparison

Metric	SPY	VOO	IVV
Average Daily Volume	70-100M shares	4-6M shares	4-6M shares
Average Spread	$0.01 (1 cent)	$0.01-0.02	$0.01-0.02
Spread as % of Price	~0.002%	~0.003%	~0.003%
Options Liquidity	Extremely High	Moderate	Moderate
Options Open Interest	Highest in world	Much lower	Much lower

SPY's liquidity is legendary. It's the most actively traded security in the world. You can move millions of dollars in and out without moving the price. For large institutional trades or options strategies, there's no substitute.

When Liquidity Matters

Options trading: SPY options have the tightest spreads and deepest markets
Day trading: Need to enter and exit quickly without slippage
Large orders: Moving $1M+ in a single trade
Market hours only: Trading during volatile market opens/closes

When Liquidity Doesn't Matter

Long-term investing: Buying and holding for years
Regular contributions: Dollar-cost averaging monthly
Retirement accounts: 401(k) or IRA investments
Amounts under $100,000: All three are plenty liquid

Tracking Error Analysis

Tracking error measures how closely an ETF follows its benchmark index. Lower is better.

Sources of Tracking Error

Expense ratio: The fund underperforms by at least this amount
Cash drag: Cash held for redemptions doesn't earn the index return
Dividend handling: Timing of dividend reinvestment
Rebalancing costs: Trading when the index changes
Securities lending: Can actually reduce tracking error by generating income

Historical Tracking Difference (vs S&P 500 TR)

Period	SPY	VOO	IVV
1 Year	-0.10%	-0.02%	-0.03%
3 Years (annualized)	-0.09%	-0.02%	-0.02%
5 Years (annualized)	-0.10%	-0.03%	-0.03%
10 Years (annualized)	-0.09%	-0.03%	-0.03%

VOO and IVV consistently track the index more closely than SPY, primarily due to their lower expense ratios and more efficient structure that allows dividend reinvestment and securities lending.

Dividend Handling

S&P 500 companies pay dividends throughout the year, and how the ETF handles them matters.

Dividend Process Comparison

Feature	SPY	VOO	IVV
Distribution Schedule	Quarterly	Quarterly	Quarterly
Dividend Reinvestment	No (cash held)	Yes (immediate)	Yes (immediate)
Cash Drag	Yes (small)	Minimal	Minimal
Current Yield (Approx.)	~1.4%	~1.4%	~1.4%

SPY's UIT structure prevents it from reinvesting dividends as they're received. Instead, dividends sit in cash until the quarterly distribution. This creates a small performance drag, especially in rising markets.

VOO and IVV can immediately reinvest dividends, keeping the fund fully invested and closely tracking the total return index.

Tax Efficiency Comparison

For taxable accounts, tax efficiency matters. All three ETFs are highly tax-efficient, but there are subtle differences.

Tax Efficiency Features

Feature	SPY	VOO	IVV
Capital Gains Distributions (2024)	$0	$0	$0
Historical Cap Gains	Rare	Never	Rare
In-Kind Redemptions	Yes	Yes	Yes
Heartbeat Trades	No	Yes	Yes

All three funds use the ETF structure's in-kind redemption mechanism to avoid capital gains distributions. This is one of the main advantages of ETFs over mutual funds.

Vanguard pioneered "heartbeat trades" - a technique that uses authorized participant transactions to purge embedded capital gains. This makes VOO (and the mutual fund shares that share its portfolio) extremely tax-efficient.

Qualified Dividend Treatment

The dividends from all three ETFs are mostly qualified dividends, taxed at the lower long-term capital gains rate (0%, 15%, or 20% depending on income) rather than ordinary income rates.

Which One Should You Choose?

After all this analysis, here's the practical advice:

Choose VOO If:

You're a long-term buy-and-hold investor
You want the lowest possible costs
You have a Vanguard brokerage account
You're investing in a retirement account (IRA, 401k)
You're making regular contributions over time
You prioritize tracking accuracy

Choose IVV If:

Same as VOO - they're essentially identical
You have a Fidelity or Schwab account with free iShares trades
You prefer BlackRock/iShares for whatever reason
Your 401(k) offers IVV but not VOO

Choose SPY If:

You trade S&P 500 options actively
You're a day trader or short-term trader
You need maximum liquidity for large orders ($1M+)
You trade during volatile periods and need tight spreads
Sentiment or nostalgia (it's the original!)

Decision Matrix

Investor Profile	Best Choice	Reason
401(k) investor	Whatever's offered	Usually limited options; all three are fine
IRA/Roth IRA	VOO or IVV	Lowest costs, no need for SPY liquidity
Taxable brokerage	VOO or IVV	Tax-efficient, low cost
Options trader	SPY	Unmatched options liquidity
Day trader	SPY	Tightest spreads, most volume
Institutional investor	SPY or IVV	Depends on order size and strategy
International investor	IVV	Often better availability outside US

The Bottom Line

Here's the truth: you can't go wrong with any of these three ETFs. They all track the same index. They're all highly liquid. They're all well-run by reputable providers.

The differences are at the margins:

VOO and IVV are better for long-term investors because of lower costs
SPY is better for traders because of superior liquidity
The cost difference is about $65 per $10,000 per decade - meaningful but not life-changing

My Recommendation

For most readers of this site:

If you're a long-term investor: Buy VOO or IVV. Pick whichever is easier at your brokerage.
If you trade options: Use SPY for options, VOO/IVV for core holdings.
If your 401(k) only has SPY: That's fine! 0.0945% is still incredibly cheap.
If you're agonizing over the choice: Stop. Just pick one and start investing. The decision to invest matters infinitely more than which of these three you choose.

What About Other S&P 500 ETFs?

There are other options like SPLG (State Street's cheaper alternative to SPY at 0.02%) and various broker-specific funds. They're fine too. But SPY, VOO, and IVV have the most assets, the longest track records, and the deepest liquidity.

Final Thought

The S&P 500 has returned about 10% annually over the past century. That means $10,000 invested grows to roughly $175,000 over 30 years. The difference between 0.03% and 0.0945% fees on that journey is about $5,000.

Five thousand dollars is real money. But the $165,000 in gains is what matters. Don't let fee optimization become an excuse not to invest. The best S&P 500 ETF is the one you actually buy and hold for the long term.

This is not investment advice. Past performance does not guarantee future results. Consider your personal situation before investing.