VOO or SPY | Which S&P 500 ETF Should You Buy?

vo or spy which investment is better for you what is up everyone my name is colin also known as the decade investor and welcome back to my youtube channel and in this video i'm going to break down the differences between the s p 500 etfs vo and spy to help you decide on which of them is better for you but before we get into that as always make sure to head down there and smash destroy show some love to that like button and leave a comment doing those two things cost you zero dollars but helps this channel tremendously and while you're down there you might as well claim your thirty dollars free two m1 finance and some free bitcoin on block fi both of those links are down in the description but with that being said let's roll the intro and dive into the video so i get this question often do i invest in voo and in spy or should i invest in voo or nspy so i wanted to create this video to put out some information to help you decide on whether or not you should invest in vo or nspy real quickly the answer to the first question you do not need to own both because voo and spy both track the exact same index that index is the s p 500 which is the 500 largest companies listed in the united states of america if you own both vo and spy all you are doing is splitting up your money over the exact same index so it makes no sense you either own one or the other but which one do you own i want to go through a couple categories of differences between vo and spy to help you decide on which one that you should invest in and finally at the end i will say which one i believe is the better investment for myself not financial advice so stick around because that answer may surprise you if we look at the top five holdings of voo and spy and we compare them we can see that they are slightly different the largest holding in both of these etfs is apple but in voo apple makes up 6.20 percent of the etf while in spy apple makes up 5.90 of the etf so a slightly larger exposure into apple within vo the second largest holding in both of these etfs is microsoft but with vo microsoft makes up 5.90 percent of the etf and with spy microsoft makes up 5.60 percent of the etf if we move on to the third largest holding within these etfs this is where the difference comes into play vo's third largest holding is alphabet at 4.40 percent of the etf while spy's third largest holding is amazon at 4.05 of the etf if we look at the fourth largest holding within these etfs voo has amazon at 3.90 percent of the etf and spy has facebook at 2.29 of the etf and finally the fifth largest holding within these etfs voo has facebook at 2.40 percent of the etf and spy has alphabet at 2.02 of the etf so we can see the top five holdings are the same however within voo and spy minus the top two holdings which were apple and microsoft the final three within the top five their weights are slightly different if we look at the weights of the top 10 holdings of both of these etfs within voo the top 10 holdings make up 29.6 of the etf while with spy the top 10 holdings make up 27.37 percent of the entire etf so this is where we're going to see later on in the video the returns are slightly different with vo and spy because the weights are slightly different but that is the holdings now moving on to the expense ratio which is another difference between voo and spy voo has an expense ratio of 0.03 percent while spy has an expense ratio of 0.09 that doesn't seem like a lot it truly isn't a lot but it does add up over time that point zero three percent for vo represents for every ten thousand dollars invested it will cost you in fees three dollars now with spy the point zero nine percent represents for every ten thousand dollars invested it will cost you in fees nine dollars so like i said it doesn't seem like a lot but it does add up over time if we look at this chart here which is a hundred thousand dollars invested with a seven percent average annual return over 20 years you're gonna end up paying about three times more in fees with spy than you would with voo so the fees are very nominal the difference but they do add up over time so the expense ratios are different between vo and spy the final difference between these two etfs here what i want to cover in this video is the returns like i said their holdings are the same but the weights are different and that's why we're gonna see here the returns are slightly different even though they both track the s p 500. comparing vo and spy in their year-to-date returns vo has a return of 18.02 while spy has a year-to-date return of 17.63 if we look at the one year of vo compared to spy vo has a one-year return of 32.63 percent while spy has a one-year return of 32.67 percent if we look at the five-year return comparing vo to spy vo has a five-year return of 101.8 percent while spy has a five-year return of 100.84 so like i said the returns are a little bit different whether we're looking at the year to date the one year or the five year they're very very similar but they do differ so in conclusion vo or spy which one should you invest in me personally if you've been on my channel you know i love voo i am a huge fan of this etf and i like it over spy for the reasons in this video number one the expense ratio is cheaper right the expense ratio is cheaper yes .03 versus .09 is not a grand difference however over time like that graph it does add up and it does equate to you paying less in fees by holding vo over spy and also number two in the long term historically speaking does not guarantee future results but vo does actually outperform spy slightly so you're going to outperform spy slightly historically speaking and you're paying less in fees every single year so i myself am a huge fan of vo however if you for some reason can't invest in vo spy is a phenomenal alternative because like i said at the beginning of this video they track the same index the s p 500 yes the expense ratio is a little bit higher with spy but the returns are very much similar their weights are very much similar their holdings are the exact same in terms of what they are because they track the s p 500 so you can't go wrong with either you just need to own one no reason to own both voo or spy let me know in the comments down below do you own spy why do you own spy over vo or vice versa why do you own vo over spy but allow me to reintroduce myself my name is colin also known as the decade investor if you have any questions comments or concerns please leave them down below make sure to smash destroy that like button and if you want to see more investing content where i post six days a week on this exact channel hit that subscribe button and at the end of every video i say this let's get investing

Channel: Decade Investor

Views: 7,996

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Id: 1OOEglO0z4E

Length: 9min 1sec (541 seconds)

Published: Tue Sep 21 2021