VOO vs SPY: Which S&P 500 ETF Wins in 2026?

VOO vs SPY: Understanding the Basics

If you have spent any time researching how to invest in the stock market, you have almost certainly come across VOO vs SPY as a comparison. These two exchange-traded funds are the most popular ways to invest in the S&P 500 index — but they are not identical products. Understanding their differences can save you real money over time, especially if you are building a long-term portfolio.

Both funds hold the same 500-odd large-cap US companies. Both aim to mirror the performance of the S&P 500. Yet they differ in cost, trading volume, dividend handling, and the type of investor they are built for. This comparison breaks down what actually matters so you can make a more informed decision.

What Are VOO and SPY?

VOO — Vanguard S&P 500 ETF

VOO is managed by Vanguard, the firm famous for pioneering low-cost index investing. Launched in 2010, VOO was designed from the ground up for cost-conscious, buy-and-hold investors. It is one of the largest ETFs in the world by assets under management.

SPY — SPDR S&P 500 ETF Trust

SPY is managed by State Street Global Advisors (SSGA) and launched in 1993, making it the oldest US-listed ETF still trading. Its age has given it an enormous base of institutional investors and traders, resulting in the highest daily trading volume of any ETF on the planet.

VOO vs SPY: Key Differences Compared

Both funds track the same benchmark, so performance over long periods is extremely close. The differences that matter are primarily structural.

Expense Ratio: The Cost That Compounds

The expense ratio is the annual fee the fund charges, expressed as a percentage of your investment. This is deducted automatically — you never write a cheque — but it quietly erodes your returns year after year.

• VOO has one of the lowest expense ratios of any ETF available. As of the most recent published data, it sits at 0.03% per year.
• SPY charges a higher expense ratio — currently 0.09% per year.

That might sound trivial, but consider a hypothetical illustration: if you invest $50,000 and assume (for illustration only — actual returns are not guaranteed) a 7% average annual return over 30 years, the difference in fees between these two funds could result in thousands of dollars less in your account with SPY compared to VOO. The gap widens the longer you hold. Always verify current expense ratios directly on each fund’s official page before investing, as these figures can change.

Trading Volume and Liquidity

SPY trades billions of dollars worth of shares every single day. This makes it the go-to ETF for institutional investors, options traders, and anyone who needs to move large positions quickly without moving the market price. The bid-ask spread — the tiny gap between the price you can buy and the price you can sell — is exceptionally tight for SPY.

VOO is also highly liquid by any normal standard, but its daily volume is significantly lower than SPY. For a long-term retail investor buying a few shares a week, this difference is functionally irrelevant. For a hedge fund executing a $50 million trade, it is not.

Dividend Structure

Both funds pay quarterly dividends derived from the dividends paid by the S&P 500 companies they hold. The yields are very similar because the underlying portfolios are nearly identical. However, VOO accrues dividends daily before paying them quarterly, while SPY holds dividends in a non-interest-bearing account until the payment date. This subtle difference means VOO may produce a marginally higher effective dividend yield — though the gap is small and should be verified at current rates.

Share Price and Accessibility

SPY shares have historically traded at roughly double the price of VOO shares, which used to matter when fractional shares were unavailable. Today, brokers including Fidelity and Charles Schwab offer fractional share investing, so you can invest any dollar amount in either fund regardless of its full share price. Always check the broker’s current terms, as features and minimums can vary.

Who Should Choose VOO?

VOO is typically the better fit if you are:

• A long-term buy-and-hold investor building wealth over decades
• Focused on minimising costs above everything else
• Contributing regularly to a retirement or brokerage account
• Not concerned with options trading or intraday liquidity

The lower expense ratio is VOO’s defining advantage, and it compounds meaningfully over time. If you want to learn more about how to get started, our guide on how to invest in the S&P 500 walks you through the full process in plain English.

Who Should Choose SPY?

SPY makes more sense if you are:

• An active trader who buys and sells frequently
• Trading options on an S&P 500 ETF (SPY has the deepest options market of any ETF)
• An institutional investor requiring maximum liquidity
• Holding the ETF for a short time horizon where the fee difference is negligible

For anyone executing short-term strategies or options strategies, SPY’s liquidity advantage outweighs its higher expense ratio. The SEC’s guide to investment funds is a helpful resource for understanding how ETF costs and structures affect investor outcomes.

Common Mistakes When Choosing Between VOO and SPY

1. Obsessing over short-term performance differences. Because both track the same index, any gap in annual returns is almost entirely explained by the expense ratio and dividend accrual method — not manager skill.
2. Ignoring the compounding cost effect. Many beginners dismiss the fee gap as “only a few basis points.” Over 20 to 30 years, the compounding effect of a higher expense ratio can amount to thousands of dollars.
3. Assuming the cheapest option is always best. If you actively trade or use options strategies, SPY’s liquidity may justify its higher cost. Context matters.
4. Not checking current figures. Expense ratios, dividend yields, and broker features change. Always verify at the fund’s official page before making a decision.

Actionable Takeaway

For the vast majority of beginner and intermediate investors building long-term wealth, VOO’s lower expense ratio gives it a clear edge over SPY. The underlying exposure is identical — you are buying the same S&P 500 — but you pay less for it each year. That difference accumulates quietly in your favour over time.

If you are still exploring your broader options, our roundup of the best index funds for beginners covers additional funds worth considering alongside VOO and SPY. This article is educational and general in nature — always consider your own financial situation and consult a qualified financial adviser before investing.

Frequently Asked Questions

What is the main difference between VOO and SPY?

The biggest practical difference is the expense ratio. VOO charges a lower annual fee than SPY, which means long-term buy-and-hold investors typically keep more of their returns with VOO. SPY has a higher expense ratio but offers greater daily trading volume and tighter bid-ask spreads, making it preferred by active traders and institutions.

Is VOO or SPY better for a beginner investor?

For most beginners focused on long-term investing, VOO is generally considered the better choice due to its lower expense ratio. The cost difference compounds significantly over decades. However, both track the same index, so the underlying exposure is nearly identical. Always verify current fees at Vanguard.com and SSGA.com before investing.

Can I buy fractional shares of VOO or SPY?

Yes. Brokers such as Fidelity and Charles Schwab offer fractional share investing, meaning you can invest a fixed dollar amount in either ETF regardless of the full share price. Check each broker’s current terms, as fractional share availability and minimums can vary.

Do VOO and SPY pay dividends?

Both VOO and SPY pay quarterly dividends, passing through the dividend income generated by the underlying S&P 500 companies. The dividend yield for both is typically close to each other since they track the same index, though small differences can arise from how each fund handles dividend accrual. Check each fund’s investor page for the most current yield figures.

This article is for educational purposes only and does not constitute financial or investment advice. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Always do your own research, and consider speaking with a licensed financial professional before making investment decisions.