Most investors fail to beat the S&P 500 over the long term, even with the help of sophisticated tools and strategies. That's why a lot of people choose to invest in exchange-traded funds (ETFs) that track the performance of this widely followed index.
Several ETFs aim to replicate the S&P 500, but some of the most popular ones are the SPDR S&P 500 ETF Trust (SPY 0.95%), the SPDR Portfolio S&P 500 ETF (SPLG 0.95%), the iShares Core S&P 500 ETF (IVV 0.98%), and the Vanguard 500 Index Fund (VOO 1.00%).
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How do these four funds stack up against each other on key criteria such as fees, liquidity, and returns? Let's take a closer look at each fund and find out which one is the best buy right now.
A comparison of S&P 500 ETFs
The SPDR S&P 500 (SPY) was launched in 1993 as the first ETF to track the S&P 500 index. It has an expense ratio of 0.09%, which is higher than the other three funds. However, it also has the highest liquidity, with an average daily volume of over 83 million shares.
The SPY has a yield of 1.43%, a beta of 1, and an alpha of negative 0.07. The beta measures the fund's sensitivity to market movements, while the alpha measures the fund's excess return over a benchmark (the S&P 500 in this case). The SPY's negative alpha indicates that the fund slightly underperformed its benchmark over the prior 36 months. The SPY has a 10-year total return of 215.7%, assuming dividends were reinvested and before taxes.
The SPDR Portfolio S&P 500 (SPLG) was introduced in 2005 as a low-cost alternative to the SPY. It has an expense ratio of only 0.02%, which is the lowest among these four funds. It also has a slightly higher yield of 1.47%, a beta of 1, and an alpha of negative 0.02. The SPLG has an average daily volume of about 5.7 million shares, which is lower than the SPY but still relatively high compared to other ETFs in this category. The SPLG has a 10-year total return of 215.3%, which is slightly lower than the SPY but still impressive for a large-cap fund.
The iShares Core S&P 500 (IVV) was created in 2000 as another low-cost option for investors who want to track the S&P 500 index. It has an expense ratio of 0.03%, which is slightly higher than the SPLG but still low compared to the category average of 0.79%. It has a yield of 1.46%, a beta of 1, and an alpha of negative 0.03. The IVV has an average daily volume of around 4.9 million shares, which is similar to the SPLG but considerably lower than the SPY. The IVV has a 10-year total return of 217.5%, which is the highest among the four funds.
The Vanguard 500 Index Fund (VOO) was established in 2010 as Vanguard's flagship ETF that tracks the S&P 500 index. It has an expense ratio of 0.03%, which is identical to the IVV and slightly higher than the SPLG. It has a yield of 1.48%, which is the highest among the four funds.
The VOO also has a beta of 1 and an alpha of negative 0.04, which are similar to the other funds but slightly worse in terms of performance relative to the benchmark. The VOO has an average daily volume of a little under 4.8 million shares, which is the lowest among the four funds but still adequate for most investors. The VOO has a 10-year total return of 217.3%, which is slightly lower than the IVV but higher than the SPY and the SPLG.
The winner?
The only significant difference between these four ETFs on these key metrics is how easily they can be traded. The SPY has the highest liquidity, which gives it an edge over the others. However, any of these ETFs would be a good choice for most investors who want to track the performance of the S&P 500 index with low fees.
