The Vanguard S&P 500 ETF has become the first ETF ever to hold $1 trillion in assets, reaching $1.03 trillion while charging a third of what the SPDR S&P 500 ETF Trust charges for the same index. The gap comes from SPY's 1993-era fund structure, not from performance, and a cheaper third option now undercuts both.
The Vanguard S&P 500 ETF has become the first ETF in history to cross $1 trillion in assets, reaching $1.03 trillion. It now sits ahead of the SPDR S&P 500 ETF Trust, which has tracked the index since January 23, 1993.
VOO charges 3 basis points for that exposure, against SPY's 9.45 basis points for the same 500 stocks. That gap costs a $100,000 position roughly $65 a year, a difference that compounds over a 20- or 30-year holding period.
SPY's 1993-Era Structure Explains the Fee Gap
The gap traces back to fund structure, not fund management. SPY is organized as a unit investment trust, a wrapper dating to 1993 that keeps the fund from reinvesting incoming dividends in index constituents between distribution dates, leaving cash idle. VOO, an open-end fund, reinvests dividends immediately.
As a result, in rising markets that cash drag has historically cost SPY several basis points of tracking performance beyond the headline fee gap.
Same Stocks, Different Returns
Both funds hold the same S&P 500 companies in the same weights, led by Nvidia, Apple, and Microsoft. SPY's top holdings show Nvidia at 7.58%, with Apple at 6.66% and Microsoft at 4.91%, and VOO's slots match within rounding, including Amazon at 3.64%.
Over the last year, VOO returned 23.66%. Over five years, the fund gained 87.34%.
A Cheaper Third Option, and the Tradeoffs
State Street, SPY's own issuer, offers a still-cheaper alternative: the SPDR Portfolio S&P 500 ETF charges 0.02%, undercutting VOO. The fund holds about $915.7 million in assets, a fraction of VOO's scale, so spreads run wider and options coverage stays thin.
Switching is simple inside a retirement account. But taxable-account holders face a different calculus: SPY's five-year price return of 74.6% means selling could trigger a capital gains bill large enough to erase years of fee savings. Options traders who rely on SPY's depth lose that depth by moving to VOO or the cheaper fund.
A 9.45-basis-point ceiling on SPY, against 3 basis points on VOO and 2 on SPYM, is the reason to reconsider the position.
Source: 24/7 Wall St.
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