VOO vs. SPY – Which One Will Make You More MONEY?

One of the most common things that you will ever hear in the investing world is people using S&P 500 returns as a benchmark or basis for investing and even financial planning. Ok…that sounds great, but how exactly can you simply invest in the S&P 500? Well, it actually is as easy as finding an index fund that tracks the S&P 500, and that’s exactly why I’m going to break down two of the most popular in this VOO vs SPY comparison!

Key Takeaways

  • VOO and SPY both aim to mimic the S&P 500 but performance does vary between the two
  • ETFs with the same goal should be relatively similar when comparing, but not identical
  • At the end of the day, the default advantage for an ETF is a lower expense ratio than its peers
  • Both ETFs have averaged 15%+ annual returns since 2010

On the docket today includes the following topics:

What is the S&P 500?

The S&P 500 is one of the most common stock market indexes that you will hear of, along with the Dow and the Nasdaq, as it tracks the performance of the 500 largest companies that are traded on a stock exchange in the U.S.

The S&P 500 is weighted based on the market cap of the company, so as you might expect, the larger companies make up an extremely large portion of the S&P 500, as you can see from this chart below from Market Watch:

A lot of people will use the S&P 500 as their benchmark for financial planning, especially in the Financial Independence Retire Early (FIRE) community, and I for one can put my hand up and say “guilty as charged”. Now, I’m not exactly planning to partake in the “RE” part of this, but the ability to become financially independent at a young age is something that is incredibly enticing to me and I know that it is to many others as well.

Using the S&P 500 to Benchmark Your Performance

So, why do I use the S&P 500 as my benchmark and financial planning baseline? Well, there are a few reasons.

1 – The S&P 500 is the Most Representative Stock Market Index

Truthfully, this is my personal opinion, but I just think that the S&P makes the most sense to invest in. The Nasdaq composite index contains all companies listed on the Nasdaq but is very heavily balanced towards companies that are in the technology sector. The other common index is the Dow which is made up of 30 companies and quite frankly, I just don’t think that 30 companies is a great representation of the U.S. stock market.

And then we have the S&P 500 which represents the 500 largest companies in the U.S. and truthfully, I think that likely means you have 500 of the best performing companies out there. Sure, there are going to be some smaller companies that are great performers and likely might even become the largest company ever, but my stance is that as soon as they make the top 500, then I’ll own a portion of them in my S&P 500 ETF.

2 – The S&P 500 is More Predictable Than Individual Stocks

As I mentioned before, I am an individual stock picker and I don’t think that will ever change for me, but I know that this isn’t meant for everyone. I’ve personally had years where I’ve outperformed the S&P 500 by over 10% and years where I’ve underperformed by 10%. That is a massive swing!

I could never imagine trying to make a financial plan based on individual stock picking. It would be nearly impossible to use any sort of historical returns to plan what the future might look like. Instead, I will always use the S&P 500 in my future calculations because there is a 100+ year track record of how it has performed vs. my 5 years of investing. Seems pretty obvious to go with something that’s tried and true, right?

The reason that it’s more predictable is because it’s an ETF of 500 different companies among various sectors and industries that will make you much more diversified than just using one individual stock performance for your planning. If there’s a different index that you’d want to use as your benchmark instead of the S&P 500, feel free to do so, but I truly think the S&P 500 is just more representative of the companies that I’d be likely to hold, so that’s what I use.

One other option that you could utilize would be to use an ETF like RSP instead of a normal S&P 500 ETF. They’re both the exact same companies but RSP is equal weight, so every single company theoretically is 0.2% of the index rather than an ETF like VOO or SPY where the companies are weighted vs. their market cap.

The argument can be made both ways on which one is better, but I don’t want to bore you here with what I’ve discussed previously

3 – It’s What Everyone Uses!

Now, not necessarily that everyone uses the S&P 500 per se, but many people will use the “stock market” as their basis for financial planning, such as with the 4% rule done by the Trinity Study. For this reason, I strongly prefer to have a similar process because it allows me the ability to accurately read and analyze their studies and apply it to my own portfolio.

In short, no need to recreate the wheel and be a contrarian! Something that a lot of people tend to use just makes sense to also follow along, assuming that you buy-in to the prior reasonings that I have given as well. Having a reliable benchmark is extremely important for your financial planning process and I think the S&P 500 is the best way to do so.

Now, you of course can just use the S&P 500 to benchmark the ETF, but that’s not technically what you’re going to be investing in. You’re going to invest in an ETF that aims to mimic the exact returns of that index, but in all actuality if you were going to invest in the ETF, you’d want to make sure that you’re taking things like management fees and dividends into account, because that’s what your true alternative would be, right?

Which Is Better – VOO or SPY?

So, which ETF should you actually be investing in? Let’s take a look at VOO vs SPY!

When comparing the two, the first thing that’s going to immediately stand out is the difference in the stock price. As of 11/16/21, the stock price for VOO was $429.52 and SPY was $467.15.

A year or two ago I could certainly see that making a big difference depending on how much you were planning to invest, but many brokerage firms like Fidelity and Schwab give you the ability to buy fractional shares, so no matter how much you have to invest, you can invest in either ETF and the share price will make absolutely no difference to you.

Historical Price Performance

When I went back and compared the two ETFs since the inception date of 9/9/2010 for VOO, they performed almost identically, which is exactly what you’re going to hope for and expect. After all, the two ETFs both have the same exact goal of trying to perfectly mimic the S&P 500 returns. As you can see, the total returns varied by a max of .07% for any year since 2011:

In other words, that is absolutely nothing more than a rounding error for all intents and purposes.

So why do they vary? Well, it could be for a few reasons. It could simply be the timing of when the funds were purchasing shares, or even a slight rebalancing variation between the two. It could also be because the weightings of the shares could just slightly vary as I mentioned.

Top 10 Holdings

If we go to ETF.com we can see that the share weightings aren’t perfectly matching:

That’s really no surprise to me because you’re talking about two completely different companies that’re running these ETFs and it’s impossible that they’re going to match up perfectly at all times. The fact that they’re as aligned as they are is actually pretty surprising to me in itself!

At the end of the day, looking slightly at the difference in performance between the two ETFs doesn’t make me feel like I should go with one or the other. But this is only half of the performance conversation!


Another aspect that I like to look at is the dividends. Do you think there was much of a difference in the dividends?

Well, in total over that 10+ year stretch, SPY actually paid out more dividends than VOO by a total of $3 and change, so you should definitely invest in SPY, right?

No! It’s important to always compare the dividend yield because that’s the amount of dividends that you receive in comparison to the price that the shares are trading at.

Remember how the share price of SPY is a little bit more than VOO? You’re going to receive a higher dividend/share due to the higher share price but you’re going to be able to afford less shares. At the end of the day, it’s a complete wash, because the variance of the dividend yield of the two ETFs is also effectively zero:

So the shares perform nearly the exact same and the dividends are basically identical – what else is there to look at? Honestly, there’s not a ton, but there is one important piece – fees!

Any time that you’re evaluating an ETF, it’s absolutely imperative that you understand the management fees, or expense ratio, that you’re going to be charged. This amount is something that’s likely not going to change and thankfully, for an ETF that has a very common goal like mimicking the S&P 500, the fees should be extremely low.

Just as a general rule of thumb, I really don’t like to invest in any ETFs that charge me over .5% fees, and I consider anything under .2% to be a drop in the bucket.

When I go to ETF.com I can type in both the tickers, VOO and SPY, to get an entire breakdown of the ETFs and their goals, and of course, look at their expense ratios.

Expense Ratio

When comparing two ETFs that have the same goal, as an S&P 500 index does, the expense ratio of those ETFs is incredibly important.

As you can see, SPY has an expense ratio of .09% which is, again, absolutely awesome:

On the other hand, VOO is sitting at just ⅓ of SPY:

So yes, it seems like VOO is the clear winner in the expense ratio aspect but again, it’s so close that to me it’s almost worthless to even fret about.

So which fund would you invest in? Personally, neither! Because I am a Fidelity investor, I would use their FXAIX fund that has even less fees, sitting at .015% expense ratio.

So which fund will make you more money? VOO, but by an ever-so-slim margin.

Using the DRIP (Dividend Reinvestment Plan) Calculator at Dividend Channel, you can see the comparison of the two ETFs since September 2010:

Essentially negligible, right?  So, does that mean that we should all invest in VOO?  You certainly can, but the outperformance is so small that it doesn’t matter and it’s not an indicator of future success, either.

Recommendation – SPY, VOO, or Something Different?!

Personally, because I am a Fidelity investor, I would use their FXAIX fund that has even less fees, sitting at .15% expense ratio.

My advice to you is this – if you’re going to take a hands-off approach and invest in ETFs that track the stock market, do that. Don’t fret over a .06% change in management fees or an extremely small tracking error. That’s going to be a complete crap shoot on which ETF is going to change, and the impact to you will be negligible once you actually start needing those funds.

Instead of focusing on finding the best S&P 500 ETF, simply find the one that has the lowest fees and go with that. Then take the extra time that you might have in your life and try to find other ways to optimize that will give you more bang for your buck.

Focusing on a 5 cent decision instead of a $10,000 one (such as downgrading an expensive car, moving to a new city or out into a suburb, or getting a side hustle) is the exact opposite reason of why I’m here. 

I want to help you make massive changes to your personal finance journey so that you can retire earlier, happier, and do whatever that you want to do knowing that your money is growing peacefully in the background.

Whatever you do, don’t invest in Fidelity Target Date Funds because that’s a surefire way to ruin your growth trajectory. Instead, checkout the Sather Research eLetter where Andrew puts his own cash to work, finding ways that we can all hit $1 million faster than just investing in ETFs! 

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