April had investors feeling good again. With the Iran war tensions slowly subsiding, stocks quickly began recovering what they had lost in March. After a 9% decline earlier this year, the S&P 500 (^GSPC +1.18%) was back at all-time highs in mid-April and has been pushing higher ever since.
There are four primary exchange-traded funds (ETFs) you can use for investing in the S&P 500:
- Vanguard S&P 500 ETF (VOO +1.60%)
- iShares Core S&P 500 ETF (IVV +1.92%)
- State Street SPDR S&P 500 ETF (SPY +1.65%)
- State Street SPDR Portfolio S&P 500 ETF (SPYM +1.66%)
Each ETF is huge in terms of assets under management (AUM), very liquid, and ultra-cheap. Choosing between them can be like splitting hairs, but there's one I prefer slightly above the others.
Image source: Getty Images.
Key takeaways
- The differences between the major S&P 500 ETFs are mostly trivial. The biggest one is the higher 0.0945% expense ratio of SPY compared to the others.
- Performance, yield, and trading spreads are virtually identical among all of them.
- For me, the tiebreaker is Vanguard's size advantage.
- All of these will give you essentially the same S&P 500 exposure. SPYM and its 0.02% expense ratio would be the winner if you want the absolute lowest cost possible.
Why the Vanguard S&P 500 ETF beats the others
If you look at the best S&P 500 ETFs from a high-level view, there's really no difference. Their performance is virtually the same. Their yield is virtually the same. They're all investing in the same index, so the only real differentiator is cost.
On that front, the State Street SPDR S&P 500 ETF gets dropped from consideration. In a segment where every basis point counts, charging nearly 6.5 basis points more than its competitors doesn't make sense for a retail investor.
If you want to look purely at expense ratio, the State Street SPDR Portfolio S&P 500 ETF wins with its 0.02% expense ratio. But that's not the only cost to consider. Trading spreads, which are a function of liquidity and tradability, can add to a fund's total cost.
NYSEMKT: VOO
Key Data Points
This is where Vanguard gets the edge. Its modestly higher trading volume and AUM base compared to both the iShares Core S&P 500 ETF and the State Street SPDR Portfolio S&P 500 ETF likely lower trading fees. That can give the Vanguard S&P 500 ETF the slightest of edges on a total cost basis.
S&P 500 ETFs: Performance and key metrics
| Metric | VOO | IVV | SPY | SPYM |
|---|---|---|---|---|
| Expense ratio | 0.03% | 0.03% | 0.0945% | 0.02% |
| AUM | $916B | $789B | $728B | $136B |
| Dividend yield | 1.16% | 1.12% | 1.14% | 1.14% |
| 1-year return | 30% | 30% | 29.9% | 30% |
Data source: Fund websites.
Unless we get a re-escalation in the Middle East conflict, May looks like it's setting up to be a good month. Corporate earnings are growing solidly. Economic growth figures aren't great, but they're good enough for the time being. That creates a supportive environment for higher stock prices.
If you're looking to invest in the S&P 500 in May or add to your existing positions, the Vanguard S&P 500 ETF is the best choice.
