Investors looking to enhance their wealth through the stock market can consider two remarkably similar exchange-traded funds (ETFs) that track the S&P 500 index: the Vanguard S&P 500 ETF (VOO) and the State Street SPDR Portfolio S&P 500 ETF (SPYM). Both funds have shown comparable performance and feature minimal fees, yet they serve different investor needs due to one key distinction.
These ETFs offer a gateway for individuals to invest in a diversified portfolio of 500 large American companies, allowing investors to benefit from the overall market performance without the complexity of selecting individual stocks. Prominent companies like Apple, Microsoft, and Nvidia are included in these funds, providing broad exposure to the U.S. economy.
The Vanguard S&P 500 ETF (VOO) is a well-established fund with $1.5 trillion in assets under management. With a 15.2-year history, it carries an impressive annual expense ratio of 0.03%, translating to just $3 yearly for every $10,000 invested. VOO currently trades at around $608 per share and holds a total of 505 stocks spanning various sectors including technology, financial services, and consumer goods.
In contrast, the State Street SPDR Portfolio S&P 500 ETF (SPYM), previously known by the ticker SPLG, manages $95 billion in assets and charges a slightly lower expense ratio of 0.02%. This fund, trading at approximately $78 per share, contains 504 holdings and closely mirrors the sector allocations and top holdings of VOO.
When dissecting performance, the figures are strikingly similar. Over the past decade, VOO has experienced a 286.0% rise, while SPYM saw a slight edge with a 286.3% increase. Both funds delivered an average annual return of 14.5%, exhibiting identical five-year maximum drawdowns of 24.4%. An investment of $1,000 made into either fund five years ago would now be worth around $1,832.
Notably, while both funds maintain a dividend yield of 1.2% and identical beta scores of 1.00—indicating that they respond consistently with overall market movements—the primary practical difference lies in their share prices. VOO’s share price of approximately $608 contrasts with SPYM’s $78, an important fact for budget-conscious investors.
For those with smaller investment budgets, this pricing difference is significant. An investor with $1,000 would be able to purchase only one share of VOO and still have $392 remaining. On the other hand, they could acquire 12 shares of SPYM, allowing for nearly complete utilization of their total investment. This flexibility can be particularly meaningful for smaller portfolios where even minor amounts of cash can impact overall investment strategies.
However, for larger accounts, the choice between the two funds becomes less significant. Whether investing in VOO or SPYM, total value matters more than the number of shares owned, as both funds present identical growth opportunities.
Moreover, VOO’s larger scale can offer advantages in terms of trading volume and liquidity, potentially leading to tighter bid-ask spreads for significant transactions. For casual investors making smaller trades, this distinction might be minimal. The expense ratio difference, while technically in favor of SPYM, equates to negligible savings—just $1 annually on a $10,000 investment—over the long term.
Ultimately, both funds serve as excellent core holdings for anyone looking to gain broad exposure to the U.S. stock market. VOO may cater to investors who prefer an established leader in the ETF space, while SPYM offers a more accessible option for those starting with smaller investment amounts or who appreciate lower-priced shares for easier portfolio management.
In conclusion, both the VOO and SPYM are effective vehicles for long-term wealth accumulation through low-cost index investing. They offer identical returns and the same market exposure, making the decision between them primarily a matter of personal preference and financial strategy.