SPY vs VOO: Which S&P 500 ETF Is Better for Long-Term Investors?
SPY and VOO both track the S&P 500, but they are not identical. This 2026 comparison looks at fees, liquidity, dividend handling, tax considerations, tracking, and portfolio fit so investors can choose the better ETF for their strategy.
Quick Answer: VOO for Most Long-Term Investors, SPY for Traders
If your goal is simple long-term exposure to the S&P 500, VOO is usually the cleaner choice. It tracks the same benchmark as SPY, but its expense ratio is lower. Over short periods, the difference looks tiny. Over decades, lower fees create a small but real compounding advantage.
SPY is still excellent, but it is strongest when liquidity matters: active trading, options strategies, institutional-sized orders, or very tight intraday execution. For a normal investor buying and holding every month, that extra liquidity is usually less important than the lower annual fee.
Practical verdict: Choose VOO if you want a low-cost S&P 500 core holding. Choose SPY if you trade frequently, use options, or specifically need the most liquid S&P 500 ETF.
SPY vs VOO Overview
SPY and VOO are two of the most widely used S&P 500 ETFs in the world. Both aim to track the performance of the S&P 500 Index, which represents large-cap U.S. companies across sectors such as technology, health care, financials, consumer discretionary, industrials, and communication services.
The reason this comparison matters is simple: because the funds track the same index, investors often assume the results will be identical. In practice, the differences come from expense ratios, fund structure, trading volume, dividend handling, and investor behavior.
| Feature | SPY | VOO | Why it matters |
|---|---|---|---|
| Issuer | State Street Global Advisors | Vanguard | Both are major ETF providers with strong scale. |
| Benchmark | S&P 500 Index | S&P 500 Index | Underlying exposure is nearly the same. |
| Launch | 1993 | 2010 | SPY is older; VOO is newer but enormous. |
| Expense ratio | About 0.0945% | 0.03% | VOO has the cost advantage for long-term holding. |
| Primary strength | Liquidity and options market | Low-cost buy-and-hold investing | The better ETF depends on how you use it. |
Fees: Why VOO Has a Long-Term Edge
Fees are the clearest difference between SPY and VOO. VOO’s expense ratio is lower, which means slightly more of the underlying S&P 500 return stays with the investor. On a small portfolio, the annual dollar difference is modest. On a large portfolio held for decades, the gap compounds.
SPY expense ratio
Higher cost, but unmatched trading depth.
VOO expense ratio
Lower cost, strong fit for long-term accumulation.
Annual fee gap
Small per year, meaningful over long holding periods.
For example, on a $100,000 portfolio, a 0.0645 percentage point fee gap is roughly $64.50 per year before compounding. That may not sound dramatic, but index investing is a game of small edges repeated for a very long time. If two funds offer almost identical exposure, the lower-fee option usually deserves serious consideration.
Performance Comparison: Nearly Identical, With a Small VOO Advantage
Because SPY and VOO track the same index, their gross performance should be extremely similar. The difference is not that one ETF owns better companies. The difference is that the lower expense ratio of VOO can slightly improve net returns over time.
In real portfolios, the performance gap may also be affected by the exact purchase date, bid-ask spread, taxes, dividend reinvestment timing, and whether the investor trades frequently. For buy-and-hold investors, the main recurring variable is still the annual expense ratio.
| Investor type | Likely better choice | Reason |
|---|---|---|
| Monthly DCA investor | VOO | Lower cost helps compounding while liquidity is already sufficient. |
| Long-term retirement investor | VOO | Low fees matter more than ultra-high trading volume. |
| Options trader | SPY | SPY has a deeper options market and tighter execution for many strategies. |
| Large institutional trade | SPY | SPY’s liquidity can reduce market impact for very large orders. |
Want to test how monthly contributions change the outcome? Use the DCA Calculator or model a custom scenario with the Investment Simulator.
Liquidity: Why SPY Still Matters
SPY remains one of the most liquid ETFs in the world. For everyday investors, VOO’s liquidity is generally more than enough. But for active traders, institutions, and options users, SPY’s trading ecosystem can be a genuine advantage.
Liquidity matters because it can affect bid-ask spreads, execution quality, slippage, and options pricing. If you buy a small amount every month and hold it for 20 years, those advantages may not matter much. If you trade large positions or build options strategies, they can matter a lot.
Simple rule: If you are investing, VOO is usually enough. If you are trading, SPY may be worth the higher fee.
Dividends and Fund Structure
Both ETFs distribute dividends, and both can work well with dividend reinvestment. SPY is structured as a unit investment trust, while VOO is structured as an open-end ETF share class of a Vanguard fund. This structural difference can affect details around dividend handling and cash drag, but for most long-term investors the practical difference is small compared with fees and investor behavior.
The most important decision is not whether SPY or VOO has a slightly higher dividend yield in a given month. The more important question is whether you reinvest dividends consistently, avoid unnecessary trading, and keep the ETF aligned with your broader asset allocation.
Tax Considerations
In U.S. taxable accounts, SPY and VOO are both generally tax-efficient ETF structures, but dividend taxes still matter. If you hold either ETF in a taxable brokerage account, qualified dividends may be taxed depending on your income and holding period. Selling shares at a gain can also trigger capital gains tax.
One common mistake is switching from SPY to VOO purely for lower fees without considering unrealized gains. If you already hold SPY in a taxable account and have a large gain, selling it may create a tax bill that outweighs years of fee savings. In tax-advantaged accounts, switching can be easier because capital gains taxes may not apply the same way.
Important: A lower-fee ETF is attractive, but tax consequences can change the decision. For large taxable positions, compare the tax cost of switching against the future fee savings.
SPY vs VOO for Canadian Investors
Canadian investors can buy U.S.-listed ETFs such as SPY and VOO, but currency conversion and account type matter. In an RRSP, U.S.-listed ETFs can be attractive because of how U.S. withholding tax rules may apply. In a TFSA, the treatment can be different. Canadian investors may also compare these funds with Canadian-listed S&P 500 ETFs such as VFV.
If you are investing from Canada, the best choice may not be simply SPY vs VOO. You may also need to compare VFV vs VOO for Canadians, account location, currency conversion fees, and whether you prefer Canadian-dollar simplicity or U.S.-listed ETF efficiency.
Which ETF Should You Choose?
For most long-term investors, the decision can be simplified into a few practical rules.
Choose VOO if...
- You are buying and holding for years.
- You invest monthly or quarterly.
- You care most about low costs.
- You do not need heavy options liquidity.
Choose SPY if...
- You trade frequently.
- You use options strategies.
- You need maximum liquidity.
- You place large intraday orders.
Use either if...
- You only need broad S&P 500 exposure.
- Your position is small.
- Your broker offers easy fractional shares.
- You value simplicity above tiny differences.
In other words, VOO is usually the better default for passive investors, while SPY remains the better specialized tool for trading. Both are strong ETFs. The mistake is not choosing the “wrong” one. The bigger mistake is delaying investing, overtrading, or abandoning the plan during volatility.
Related Tools and Next Steps
Once you choose an ETF, the next step is deciding how much to invest, how often to contribute, and how the fund fits into your overall portfolio. These related pages can help strengthen your plan:
- Top 10 ETFs for Long-Term Investing for broader ETF comparisons.
- Top 5 ETFs for Passive Investing for Canada and U.S. portfolio ideas.
- Top 5 ETFs for Monthly DCA Contributions if you invest on a schedule.
- SPY vs QQQ if you want to compare broad S&P 500 exposure with a tech-heavy Nasdaq ETF.
- Compound Interest Calculator to project how long-term ETF investing can grow.
FAQ: SPY vs VOO
Is VOO better than SPY?
VOO is usually better for long-term buy-and-hold investors because it has a lower expense ratio while tracking the same S&P 500 index. SPY may be better for active traders and options users because of its liquidity.
Do SPY and VOO hold the same stocks?
They both aim to track the S&P 500, so their holdings are extremely similar. Small differences can appear from timing, cash, fund structure, and index implementation, but the core exposure is essentially the same.
Why is SPY more expensive than VOO?
SPY is older, extremely liquid, and widely used by institutions and traders. Its higher fee is less attractive for long-term passive investors but may be acceptable for users who benefit from its trading ecosystem.
Should I switch from SPY to VOO?
It depends on taxes and account type. In a tax-advantaged account, switching may be simple. In a taxable account, selling SPY can trigger capital gains, so the future fee savings should be compared with the tax cost.
Is SPY or VOO better for monthly investing?
VOO is usually the better default for monthly investing because its lower expense ratio helps long-term compounding and its liquidity is sufficient for most investors.
Sources and Method Notes
This article uses fund provider materials and general ETF analysis principles. ETF expenses, assets, yields, and holdings can change, so investors should review the latest fund pages before making decisions.