Over the long term, it’s incredibly difficult to assemble a portfolio that outperforms the S&P 500, which has delivered average annual returns of about 10% over a nearly 90-year period. What’s more, buying an S&P 500 ETF, or exchange-traded fund, is an easy way for investors to buy a big slice of the market for a relatively small price.
And while most S&P 500 ETFs are composed of the same investments, there are some differences you should know before making a selection between them.
What's the best S&P 500 ETF?
If you search for S&P 500 ETFs, you may come across dozens of funds. Just because S&P 500 is in a fund’s name doesn’t necessarily mean it tracks the index as a whole. Rather, many of these ETFs track sub-components, say value or growth stocks, within the broader index.
But you won’t have to wade through a ton of options to decide on an ETF that tracks the performance of the S&P 500 index as a whole. The following funds track the entirety of the index.
ETF
Ticker
Annualized 5-year return
iShares Core S&P 500 ETF
IVV
13.16%
Vanguard S&P 500 ETF
VOO
13.15%
SPDR S&P 500 ETF Trust
SPY
13.04%
Source: VettaFi. Data is current as of market close on May 31, 2024, and is for informational purposes only.
How to choose an S&P 500 ETF
The three S&P 500 ETFs are quite similar in two important aspects: You won’t have trouble finding these ETFs at most online brokers, and they’re very liquid, meaning it’s easy to buy and sell them on any given day.
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We’re not here to pick a winner — the right fund for you is a personal decision — but there are some nuances you may want to consider:
Expense ratios. VOO and IVV boast the lowest management fee at 0.03%, about one-third of the SPY ETF. While the difference between a 0.03%, and 0.0945% expense ratio may seem trivial, such fees can really add up. For every $10,000 invested, these respective fees equal $3 and $9.45 annually. Then consider the difference at higher balances, such as $100,000.
Trading costs. Many of the best brokers for ETF investing offer hundreds of commission-free ETFs, but the specific fund list varies broker to broker. Fortunately, most major brokerages no longer charge commissions on ETF, stocks or options trades.
Price. There’s a slight difference in the price at which each fund currently trades. This shouldn’t necessarily be a deciding factor, but it may affect how many shares you can buy at any given time.
Yield and return. There are some slight differences across these funds even though they all track the same index. These differences generally relate to return and yield. These returns will change over time, and there's no guarantee that the ETF with the best return right now will have the best return in the future. That's why we look at the 5-year return, to see how each ETF performs over the long-term.
» Related:25 best-performing high-dividend ETFs
» See the full list of the best brokers for ETF investors
You only need one S&P 500 ETF
For some people, digging into the details is half the fun of investing. For others, it’s all minutia. All three of the ETFs listed here have lower-than-average expense ratios and offer an easy way to buy a slice of the U.S. stock market.
You could be tempted to buy all three ETFs, but just one will do the trick. You won’t get any additional diversification benefits (meaning the mix of various assets) because all three funds track the same 500 companies. What’s more, you might tie up money that could be better invested elsewhere.
No matter which S&P 500 ETF you ultimately select, this fund should serve as a foundation in your portfolio. Not sure what to invest in next? Our guide on how to build a good investment portfolio offers some tips.
Neither the author nor editor held positions in the aforementioned investments at the time of publication.
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Frequently asked questions
Which S&P 500 ETF has the highest volume?
At the time of writing, the SPY ETF has considerably greater volume than the other two S&P 500 ETFs listed in this article.
Do S&P 500 ETFs pay dividends?
Usually, yes, although S&P 500 ETFs may have a lower yield than high-dividend ETFs.
Vanguard S&P offers a lower expense ratio (0.035%) than SPY (0.095%), which means lower costs for investors and potentially higher net returns over the long term. VOO might be the more economical choice for cost-conscious investors, especially those investing large sums or planning for long-term goals like retirement.
Vanguard S&P offers a lower expense ratio (0.035%) than SPY (0.095%), which means lower costs for investors and potentially higher net returns over the long term. VOO might be the more economical choice for cost-conscious investors, especially those investing large sums or planning for long-term goals like retirement.
VOO has a consensus rating of Moderate Buy which is based on 407 buy ratings, 89 hold ratings and 8 sell ratings. What is VOO's price target? The average price target for VOO is $546.28. This is based on 504 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
Both are very low cost compared to the average ETF in the US market. Both are great options, well diversified, are run by amazing teams. However, fees do matter, and you get what you don't pay for in the financial industry. So, that is the reason why we give VOO a Gold rating, while SPY a Silver rating.
While they may look similar, they are quite different. The choice between VTI and VOO hinges on an investor's risk tolerance and time horizon. VTI is a better fit for long-term, diversified growth due to its broad market coverage of all US stocks, including large, mid, small and micro-cap stocks.
In the past year, QQQ returned a total of 31.48%, which is higher than VOO's 27.14% return. Over the past 10 years, QQQ has had annualized average returns of 18.49% , compared to 12.72% for VOO. These numbers are adjusted for stock splits and include dividends.
Based on our forecasts, a long-term increase is expected, the "VOO" fund price prognosis for 2028-03-01 is 551.296 USD. With a 5-year investment, the revenue is expected to be around +53.15%. Your current $100 investment may be up to $153.15 in 2028. Get our PREMIUM Forecast Now, from ONLY $7.49!
VOO has over $1 trillion in assets under management and provides investors with exposure to all the largest companies in the United States. You're getting a basket of stocks that has a 29.81% weighting toward technology, and the Magnificent 7 makes up roughly 25% of the index.
The Vanguard S&P 500 ETF (VOO 0.87%) is a top choice for most index fund investors. Even Warren Buffett recommends it above any other investment. There's a good reason for that. Its low expense ratio and tight index tracking make it a top choice for anyone looking to match the returns of the S&P 500.
The estimates from strategists put the median target for the S&P 500 at 5,200 by the end of 2024, implying a decline of less than 1% from Friday's level, according to MarketWatch calculations. Heading into 2024, the median target was around 5,000 (see table below).
S&P 500 earnings to increase 9.3% compared to a year ago. S&P 500 earnings growth to accelerate in the second half of the year. Full-year S&P 500 earnings growth of 11.4% in 2024. Full-year S&P 500 revenue growth of 5% in 2024.
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