VOO vs SPY vs IVV: three S&P 500 ETFs, one index.

Side by side

Expense ratio: the headline number

VOO and IVV both charge 0.03% per year. SPY charges 0.0945%, more than triple the others verify×DON'T TRUST, VERIFYClaim: Expense ratios: VOO 0.03%, IVV 0.03%, SPY 0.0945%.Verify at: VOO ↗ · IVV ↗ · SPY ↗Expense ratios can change; confirm at the issuer's product page..

Not a huge number relative to the position. But the cost is paid every year. For a buy-and-hold investor with no other reason to prefer SPY, the cheaper options are the rational default.

Why SPY is still popular despite the fee

• Options liquidityliquidityHow quickly and easily you can convert an asset to cash without significantly affecting its price.Full definition. SPY has the deepest options market of any equity ETF. Bid-ask spreads on options contracts are 1-2 cents wide; on VOO/IVV they can be 5-10 cents. For active option traders, the spread savings on SPY exceed the expense ratio cost.
• Day-trader bid-ask spread. SPY trades roughly 50-100 million shares per day. The penny-wide spreads at scale make round-trip execution costs lower than VOO or IVV for traders.
• Institutional liquidity. HedgehedgeAn investment made to offset potential losses in another position, like buying gold to protect against currency declines. funds and large asset allocators have used SPY as a "cash equity" position for decades. The liquidity feeds itself.

None of these matter to a buy-and-hold retirement investor. The 30-year hold pays the expense ratio every year and benefits from the options liquidity zero days. Pick VOO or IVV.

Structure differences: UIT vs ETF vs share class

SPY is a Unit Investment Trust (UIT). It cannot reinvest dividends internally and must hold the exact index constituents. Dividends are paid out quarterly and sit as cash in the trust between the record date and the pay date. This creates a tiny "cash drag" during bull markets that contributes to SPY's slightly worse tracking record versus its index.

IVV is a pure ETF. It can reinvest dividends and use sampling techniques to track the index. Cash drag is minimal.

VOO is an ETF share class of the VFIAX mutual fund. Vanguard's patented structure (now expired and being adopted by other issuers) lets the ETF share class use the mutual fund's tax-efficient capital gainscapital gainsThe profit from selling an asset for more than you paid for it. Taxed differently depending on how long you held the asset. management. This historically gave VOO a small structural tax advantage versus IVV. The advantage is small in practice for S&P 500 trackers because the underlying index has low turnover.

Tax efficiency in a taxable account

All three ETFs distribute the underlying dividends from the S&P 500 companies. As of 2026 the index yields roughly 1.3-1.5%. Dividends are taxed at long-term capital gains rates (assuming qualified dividend treatment, which the underlying stocks provide).

Capital gain distributions from the ETFs themselves are usually $0 because of in-kind creation/redemption (the mechanism that lets ETFs avoid realizing internal capital gains). All three have a near-perfect record of no capital gain distributions in recent years.

In a tax-advantaged account (Roth IRAIndividual Retirement Account (IRA)A personal retirement savings account with tax advantages. Two main types: Traditional (tax now, pay later) and Roth (pay now, tax-free forever).Full definition, 401k, HSAHealth Savings Account (HSA)A tax-advantaged account for healthcare costs, available with a high-deductible plan; contributions, growth, and qualified withdrawals are all tax-free.Full definition), tax efficiency is moot. Pick the lowest fee.

Premium and discount to NAV

All three trade essentially at NAV with deviations measured in single basis points. The arbitragearbitrageProfiting from price differences in the same asset across different markets, often by buying low in one place and selling high in another. that keeps ETF prices aligned with their NAVs is robust at this scale. You will not get a "discount" on any of these for retail-sized orders; you will not pay a meaningful premium either.

Bid-ask spreads at market open (9:30-9:45 ET) and close (3:55-4:00 ET) can briefly widen. For buy-and-hold investors making one purchase, this doesn't matter. For monthly DCADollar-Cost Averaging (DCA)Investing a fixed amount on a regular schedule regardless of price, to reduce timing risk.Full definition, place orders during the calm hours mid-day.

If you have to pick one

• Holding in a Vanguard account: VOO. Same expense ratio as IVV, no transfer needed.
• Holding in a Fidelity, Schwab, or generic brokerage account: IVV or VOO. Both are 0.03%. Pick the one your broker prices commission-free (most brokers now do both).
• Trading options or doing high-frequency rebalancingrebalancingBuying and selling assets to restore your target portfolio split after market movements cause drift.Full definition: SPY. The deep options market and tighter spreads pay back the higher expense ratio for active strategies.
• Want zero expense ratio entirely: consider FZROX (Fidelity Total US Market) or FXAIX (Fidelity 500 Index). FZROX is 0.00% but is a mutual fund, not an ETF, and is Fidelity-only.

Common questions

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