What Makes the S&P 500 the Core of So Many Portfolios?
The S&P 500 is a stock market index that tracks roughly 500 of the largest publicly traded companies in the United States, covering about 80% of the total U.S. stock market by capitalization. Since 1957, the index has averaged just over 10% per year in total return, making it the benchmark that actively managed mutual funds and portfolio managers get measured against.
Jack Bogle, the founder of Vanguard, helped create the first S&P 500 index fund for individual investors around a simple idea. His advice: “Don’t look for the needle in the haystack. Just buy the haystack.” Investing in low cost S&P 500 funds has since become the foundation of long-term portfolios across every account type, from tax-advantaged accounts to taxable accounts.
Today, four exchange traded funds (ETFs) dominate S&P 500 investing: VOO, SPY, SPYM, and IVV. These ETFs all hold the same large cap stocks and track the same underlying index. For anyone looking to invest in the S&P 500, the differences come down to cost, liquidity, and structure. Once you are clear on these factors, deciding which fund to invest in becomes much simpler.
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What Factors Should You Focus on When Comparing S&P 500 ETFs?
When it comes to comparing these ETFs, the key factors come down to basically three things: the expense ratio, the bid/ask spread, and how you plan on using the fund.
The expense ratio is the annual fee these funds charge, and it’s deducted directly from your returns. For funds at 0.02% to 0.03%, the impact is minimal, and your returns will be very close to the S&P 500. But for funds at 0.0945%, that starts to add up, especially when you’re investing for the long term. And it’s even more of a difference when you compare that to other low-cost ETFs that track the exact same S&P 500.
The bid/ask spread is the gap between what a buyer is willing to pay and what a seller will accept on the market. For long-term investors who buy and hold, the spread doesn’t really matter. But for active traders consistently buying and selling, a tight spread can save them a lot of money on every transaction.
Understanding these factors will help you pick the right fund for your strategy.
How Do VOO, SPY, SPYM, and IVV Compare?
Here is a full side-by-side comparison using data as of March 31, 2026.
| Metric | VOO | SPY | SPYM | IVV |
| Issuer | Vanguard | State Street (SSGA) | State Street (SSGA) | BlackRock / iShares |
| Inception Date | Sep 7, 2010 | Jan 22, 1993 | Nov 8, 2005 | May 15, 2000 |
| Expense Ratio | 0.03% | 0.0945% | 0.02% | 0.03% |
| Assets Under Management (AUM) | ~$885B | ~$703B | ~$133B | ~$765B |
| Avg Daily Share Volume (3mo) | 10.5M shares | 87.3M shares | 16.7M shares | 9.1M shares |
| Bid/Ask Spread (30-day) | 0.01% | 0.00% | 0.01% | 0.00% |
| Dividend Yield (TTM) | 1.11% | 1.05% | 1.07% | 1.15% |
| 1-Year Return (as of 3/31/26) | 17.67% | 17.59% | 17.73% | 17.70% |
| 5-Year Ann. Return (as of 3/31/26) | 12.00% | 11.90% | 12.00% | 12.00% |
| 10-Year Ann. Return (as of 3/31/26) | 14.11% | 14.01% | *Index changed 2020 | 14.12% |
| Sources: Vanguard.com | ssga.com | ishares.com | InvestLane ETF Insights, updated April 17, 2026 | ||||
Long-Term Performance of Top Index ETFs
These index ETFs all track the same market benchmark so long-term performance figures are nearly identical. The small gaps in the 5 year and 10 year columns can be almost entirely attributed to the expense ratio. Every single basis point of annual cost adds up over the course of decades, compounding against anyone who holds for that long.
SPY: The Original S&P 500 ETF Built for Traders
SPY, the SPDR S&P 500 ETF trust from State Street, launched back in January 1993 as the first exchange traded fund to get listed in the United States.1 It averages 87.3 million shares per day with a 30-day bid/ask spread of essentially zero. That basically makes it the most widely traded equity ETF on the market
Investors like SPY for a reason, it’s the go-to for active traders, institutions, and anyone who wants to use call options or derivatives on the S&P 500. When volatility spikes and spreads on other ETFs start getting wide, SPY’s spread stays put. That sort of consistent liquidity is important for people who regularly trade stocks and ETFs or need to move large positions quickly.
How Does SPY’s Expense Ratio Affect Long-Term Returns?
SPY charges 0.0945% per year, the highest expense ratio of the four funds. For active traders, that cost is justified by the liquidity advantage. However, for long-term investors in index funds who never touch their positions, it is dead weight compared to the other low cost options in this group.
Let’s consider an example of just how big a difference the expense ratio can make in practice. Suppose you start with $1,000 and add $500 a month to an index fund over a long career – earning 10% a year. At SPY’s rate, you’d pay around $72,000 in total fees over 40 years. In contrast the same investor in SPYM at 0.02% would pay around $14,000. That’s $58,000 paid to a fund company just for owning the same 500 companies. Now compare both to an actively managed fund at 0.70%, and the fees total climbs to roughly $470,000 over the same period.
The SPIVA scorecard shows that over 20-year periods, the majority of actively managed funds fail to outperform their benchmark index after fees.2 It’s no surprise then, that the whole passive investing idea has reshaped the fund industry. The math on fees is why index funds and low-cost ETFs keep taking market share from active mutual funds.
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SPYM: The Lowest-Cost S&P 500 ETF
SPYM, The SPDR portfolio S&P 500 ETF from State Street, is the low-cost alternative to SPY. They track the same S&P 500 index.3 The thing that sets them apart is who they are built for.
The structure here is similar to what Invesco did with QQQ and QQQM: one fund for maximum liquidity and institutional trading, and the other one for long term buy-and-hold investors who want the same index exposure at a lower expense ratio. SPYM charges just 0.02% per year, which is the lowest of the four funds here.
Why SPYM Works for Buy-and-Hold Index Investors
SPYM currently has $133 billion and trades around 16.7 million shares per day, which is more than sufficient liquidity for anyone purchasing shares and holding for the long haul. The 30 day bid/ask spread runs around 0.01% – a bit wider than SPY in percentage terms but utterly irrelevant for long-term fund holders.
SPYM launched in November 2005 but initially followed a different benchmark, switching to the S&P 500 in January of 2020. Since that time, SPYM has been tracking the S&P 500’s performance in line with every other fund in the group. Compared to other index funds and fellow funds in this group, SPYM offers the lowest cost option for investors who want to simply reduce expenses when it comes to their index fund portfolio.
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IVV: The iShares Core S&P 500 ETF
IVV is the iShares Core S&P 500 ETF from BlackRock, launched in May 2000 and grown to approximately $765 billion.4
How the iShares Core S&P 500 Fund Stacks Up
The iShares core S&P 500 fund comes with an expense ratio of 0.03% and distributes dividends on a quarterly basis. The iShares core structure has a well-respected track record for index management, courtesy of BlackRock. That means exposure to the same big cap stocks and securities as every other fund here, with daily disclosure of holdings that investors who like to keep an eye on what they own will appreciate.
The iShares core S&P 500 approach has provided clean S&P 500 returns for 25 years, and has been tested in multiple market cycles.
For long term buy-and-hold investors, IVV, VOO, and SPYM are really all interchangeable. At 0.03%, the iShares fund sits alongside the Vanguard S&P 500 fund in the ultra-low-cost category, with strong liquidity and reliable performance as well.
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VOO: Why the Vanguard S&P 500 ETF Became the World’s Largest
VOO is the Vanguard S&P 500 ETF, and it’s the largest S&P 500 ETF in the world in terms of total assets. Launched in September 2010, the Vanguard S&P 500 fund has accumulated about $885 billion in ETF assets.5
What Drives Assets Into the Vanguard S&P 500 Fund
VOO carries the same 0.03% expense ratio as the iShares fund, and is traded in a staggering 10.5 million shares per day. The Vanguard fund structure is a bit different from the rest in that it’s controlled by its own funds, rather than by outside shareholders. This difference gives Vanguard a unique incentive to keep costs low. And it has, for decades, which is reflected in the Vanguard S&P 500 fund’s track record.
When comparing VOO to the other top S&P 500 index funds, the Vanguard S&P 500 cost structure and strong track record of delivering full S&P 500 returns stands out. The sheer scale of the Vanguard S&P 500 fund also gives investors confidence in its long-term continuity. This is part of the reason why assets keep flowing in at such a rapid pace.
What Are the Risks of Owning S&P 500 ETFs?
Buying an S&P 500 ETF is not risk-free. These are broad market equity ETFs with full exposure to US stocks, so when the market goes down, these index funds lose money right along with it. The S&P 500 dropped about 34% in 2020, 18% in 2022, and a painful 50% during the 2008 financial crisis. Investors who jumped ship during those downturns locked in real losses on their investments.
On the other hand, the case for staying invested through market downturns is a strong one. Compared to individual stocks or sector ETFs, S&P 500 ETFs have lower volatility, thanks to diversification across 500 large cap companies that cover every major sector; tech, finance, and healthcare. Spreading risk across so many securities significantly reduces the impact of a single stock or sector collapse on the portfolio.
Investors are often most comfortable reducing risk and lowering volatility as they near retirement by adding bonds to a broader portfolio. Bond index funds tend to hold their value during equity downturns, providing stable income from dividends and interest, right alongside the growth potential of stocks. A portfolio that holds equity ETFs, bonds, and bond index funds tends to show lower volatility and smaller drawdowns compared to a pure equity allocation.
Mutual Funds vs. ETFs: Does Structure Really Matter?
Many investors still hold S&P 500 exposure through mutual funds instead of ETFs, funds like Vanguard’s VFIAX or Fidelity’s FXAIX are two great examples. And there are some real differences in structure worth knowing about when considering these different investment vehicles.
Mutual funds get priced only once per day, at market close. ETFs, on the other hand, trade all day like stocks which gives investors real-time pricing and flexible entry and exit points. For buy-and-hold index fund investors, that flexibility probably won’t change much over time. But for active traders, it makes a big difference.
The bigger difference shows up in tax efficiency as soon as you factor in capital gains. With ETFs, they tend to pay out fewer taxable gains than mutual funds because of the way they’re created and redeemed, basically in-kind, rather than selling off individual shares and generating a lot of capital gains. So in a taxable account, that means big after-tax savings over time for ETF holders.
If you’re trying to figure out how ETFs compare to mutual funds on tax efficiency, it’s worth taking a closer look for any investor putting real money to work in an investment outside a tax-advantaged account.
Which S&P 500 ETF Should You Buy?
For active traders: SPY is the one to go with. It has the best liquidity, the tightest spread, and is the highest daily volume of any S&P 500 ETF out there. And if you’re running options strategies on the S&P 500, it’s pretty much the only game in town.
For long-term investors who are just looking to hold onto their shares for years, or decades even, then the best options are going to be SPYM, VOO, and IVV. That’s for those who want to invest in the S&P 500 but don’t want to have to worry about day-to-day market fluctuations. The beauty of these index funds is that they’re very inexpensive to own, in particular SPYM at just 0.02% is the lowest cost option. Then there’s the vanguard S&P 500 fund and IVV at 0.03% which have deeper liquidity and longer track records.
Any of those three will do, just pick one and stick with it. Invest regularly and leave it alone.
The worst investment decision you can make is pay through the nose for active funds that consistently underperform the index. Meanwhile the best index funds here are beating most of the active fund managers out there by simply tracking the market and keeping costs low.
To see the difference with visuals on how trade costs and fees impact your returns over time, check out this article for more details.
Where to Go From Here
The performance gap between SPYM, VOO, and IVV over 30 years is a few thousand dollars in fees. The difference between those index funds and staying out of the market altogether could be millions of dollars over 30 years. The real takeaway here though, is that getting your money invested in an S&P 500 ETF and sticking with it is the winning strategy. That means investing early, investing regularly and riding the market ups and downs. It really is that simple, compound growth just takes care of itself.
All four of those S&P 500 ETFs are free to trade with most brokerages. There is no minimum to get started, even just one share is fine. And most platforms give you the option to buy fractional shares if that’s what you need. Just get your money in the market as early and as consistently as possible, because that’s what drives wealth-building more than anything else.
First, you need to find a brokerage account that suits your needs though. Once you have your account open, pick one fund, invest consistently, and keep investing no matter what the market does. The best time to start investing was yesterday. The second best time is today. Waiting is going to cost you more than the choice of which fund you invest in.
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