The ETF crown
Products tracking the S&P 500 (SP500) make up a good percentage of investor portfolios – and for good reason. The benchmark index just closed at a fresh record high and has returned more than 20% annually over the past two years. While there are many ways to gain exposure to the S&P 500, many have been focusing on the cheapest ways to do so, especially with popular ETFs.
Case in point: The first-ever U.S.-listed ETF, the SPDR S&P 500 ETF Trust (SPY), was just topped by its arch-rival in terms of assets under management. The Vanguard S&P 500 ETF (VOO) had nearly $632B in AUM, compared to the $630B of SPY, according to calculations as of Tuesday. Not far behind is the iShares Core S&P 500 ETF (IVV), which has $609B of assets under management based on its share count.
What happened? Investors and financial advisors are getting more price-conscious, especially in the era of DIY investing. The low-cost Vanguard S&P 500 ETF (VOO) and BlackRock’s iShares Core S&P 500 ETF (IVV) feature an expense ratio of just 0.03%, compared with the 0.095% expense ratio of State Street’s SPDR S&P 500 ETF Trust (SPY). The first two have also recorded inflows of $115B and $87B, respectively, in 2024, compared with the $17B in inflows for SPY. State Street does offer the SPDR Portfolio S&P 500 ETF (NYSEARCA:SPLG), with an expense ratio of just 0.02%, which is more catered to buy-and-hold investors and can also be helpful for those who have a smaller portfolio.
Why would one opt for SPY? Name-brand and founder status have been associated with the ETF, as well as better liquidity and spreads for trading and options. But times are indeed changing. The S&P 500 ETF crown now belongs to Vanguard, which has been cutting its fees across the board. Earlier this month, the investment company announced the “largest ever expense ratio reduction,” which will impact 87 open-end mutual and exchange-traded funds and “save Vanguard’s investors more than $350M in 2025 alone.”
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