Quick Read
VOO crossed $1 trillion first in ETF history, charging 3 basis points against SPY’s 9.45 for identical S&P 500 exposure.
SPYM charges just 0.02%, undercutting even VOO, but its $916 million asset base delivers wider spreads and nearly no options coverage.
SPY’s 75% five-year gain means taxable account holders face a capital gains bill that could erase years of fee savings by switching.
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The SPDR S&P 500 ETF Trust (NYSE:SPY) has been the default S&P 500 vehicle since January 23, 1993, and its $9.8 billion-plus asset base reflects three decades of habit, deep options liquidity, and institutional inertia. SPY holders own it for a reason: it is the most-traded ETF on the planet, and for anyone running short-dated options or executing block trades, that liquidity is a genuine feature. But a quieter rival is about to hit a milestone SPY never will at current fees. The Vanguard S&P 500 ETF (NYSEARCA:VOO) holds $1.03 trillion in assets, making it the first ETF to cross the trillion-dollar mark, and it does so while charging SPY holders roughly one-third of the fee for the same 500 stocks.
Why SPY Still Has 30 Years of Momentum
The S&P 500 is what SPY tracks by holding the common stocks included in the index, with each stock’s weight substantially corresponding to its weight in the Index. Its top holdings mirror the benchmark exactly, led by NVIDIA at 7.58%, Apple at 6.66%, and Microsoft at 4.91%. For traders, the tight bid-ask spreads on SPY and the enormous open interest in options are irreplaceable. For long-term holders, though, those advantages do not show up on the account statement. What shows up is the fee, along with a structural quirk that most SPY owners have never had explained to them.
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Where SPY Falls Short: A 9.45 Basis Point Ceiling
At 9.45 basis points, SPY’s expense ratio is 0.000945, while VOO charges just 3 basis points, at 0.0003. For a $100,000 position, that gap amounts to roughly $65 per year in fees, which compounds meaningfully over a 20- or 30-year holding period. The constraint for SPY is structural.
The fund is organized as a unit investment trust, a legacy 1993 wrapper that prevents it from reinvesting incoming dividends in index constituents between distribution dates, leaving cash idle. VOO, by contrast, is an open-end fund that reinvests immediately. In rising markets, that cash drag has historically cost SPY several basis points of tracking performance beyond what the headline fee gap would suggest.
