VOO has kept about a tenth of a percentage point a year more of the S&P 500 than SPY
VOO charges 0.03% against 0.0945% on SPY for the same stocks, and SPY is the better buy only if you trade options or the tax on a switch would exceed the return gap.
Key takeaways
The Vanguard S&P 500 ETF, VOO, is the better fund for money you will leave in the S&P 500, the standard index of large U.S. companies. It has kept about a tenth of a percentage point more of the index's return each year than the State Street SPDR S&P 500 ETF Trust, SPY.
The two funds own the same stocks, and SPY charges 0.0945% against 0.03% on VOO. The choice reverses if you trade options. If you already hold SPY, a tax bill on the sale can cost more than years of that return gap.
The stocks are the same
Both funds are built to track the S&P 500. Vanguard says VOO replicates the index, holding each stock near its index weight. State Street says SPY seeks, before fees, to match the index's price and yield.
On Sept. 30, Vanguard and State Street each reported Nvidia at about 8.4% of the fund, Apple at about 7.4% and Microsoft at about 5.8%. The two funds hold 501 of the same stocks.
Fidelity noted in February 2026 that the index lists more than 500 stocks, because a few of its companies issue more than one class of shares. Both of Alphabet's classes are in each fund.
The shortfall is wider than the fee
Vanguard's fee is 0.03%, the prospectus rate as of April 28, 2026. State Street's gross and net expense ratios are each 0.0945%, so nothing is being waived.
On $10,000, Vanguard charges $3 a year and State Street charges $9.45, a little more than three times as much. The difference is $6.45.
The return gap has been a bit wider than the fee, and it has not wandered. These are net asset value returns through Sept. 30, from Vanguard's fact sheet and State Street's.
The one-year figure is that year's total return. Longer periods are average annual returns. The S&P 500 row is the index return both issuers report.
VOO trailed the S&P 500 by 0.04 percentage points in every window, just above its fee. SPY trailed by 0.14 to 0.16 percentage points, wider than its fee each time.
On the 10-year returns, $100,000 grew to $414,874 in VOO and $410,933 in SPY over the decade ended Sept. 30. The difference was $3,941.
State Street's prospectus, dated Jan. 26, 2026, describes SPY as a unit investment trust. Brendan McCann wrote in a March 12, 2026 Morningstar article that the trust cannot lend its shares, cannot use derivatives to keep spare cash invested in the stocks, and must hold dividends in an account that pays no interest until the quarterly payout. Lending shares means loaning stock to a borrower and collecting a fee, and he called the idle dividend cash a small but persistent drag.
In a Feb. 3, 2026 Morningstar article, McCann said the reasons for the return gap are the trust's inefficiencies and the difference in fees.
Options, or a taxable sale, can favor SPY
Over the 20 sessions through Oct. 22, SPY traded $31.1 billion a day on average, more than seven times the $4.3 billion in VOO. State Street reported that as of June 30, SPY accounted for 99.2% of options open interest among S&P 500 ETFs.
A position you will not trade does not need that market. Vanguard puts the 30-day median bid-ask spread on VOO at 0.004% as of Oct. 20, about 40 cents on a $10,000 purchase.
If the shares are already yours, weigh the tax on selling them against the return gap. On a $100,000 balance, about a tenth of a percentage point is $100 in a year. As that stake grew, the same gap compounded to the $3,941 difference over the 10 years ended Sept. 30.
ETF.com reported on June 8, 2026 that the tax-efficiency difference between the structures is negligible for most people in a taxable account. The bill that can overwhelm years of the return gap is the tax on a gain you realize to switch.
In a retirement account, where a sale is not taxed, the return gap decides it, and new money that will sit still belongs in VOO. SPY is the fund when you trade options.
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