This is going to be a short one. I’m surprised how often I come across individual investors who hold State Street’s SPDR S&P 500 ETF Trust (ticker: SPY) over Vanguard’s S&P 500 ETF (ticker: VOO). What’s the difference between these two? Not a lot besides fees, at least for the typical medium to long-term investor1.
As of the date of this post, SPY has an expense ratio of 0.0945% while VOO sits at 0.03%. That means for every $1,000,000 invested in SPY, you are paying $945 a year in fees to iShares. The same amount invested in VOO translates to $300 a year going to Vanguard. This is a $645 a year difference for two very similar products that track the same index.
Paying the lowest fee for a fund isn’t necessarily the best strategy to pursue when you are looking across different types of strategies. An alternative credit ETF has a different operational setup and risk / return profile than a large cap index ETF. But fees are very important when comparing funds that track the same strategy and index.
If all things are more or less equal between two ETFs, then the lower fee version should have consistently higher returns roughly equal to the gap in fees. Let’s take a look at the average annual performance for SPY vs. VOO to see if the lower fees on VOO appear to translate to higher returns:
| Ticker | YTD | 1yr | 3yr | 5yr | 10yr |
| SPY | 10.71% | 15.85% | 19.40% | 14.64% | 14.46% |
| VOO | 10.79% | 15.96% | 19.53% | 14.70% | 14.57% |
Market price returns are before tax and inclusive of reinvested dividends and net of fund fees as of August 31, 2025. Data from each provider’s website.
What you see is a pretty consistent 0.06% to 0.13% performance lag from SPY vs. VOO across all time periods above. Other factors can affect performance such as tracking error as well as premiums / discounts to NAV but we believe the fee difference is a significant contributor to the performance difference in this case.
This is an example where knowing what to do (invest in a low-cost S&P 500 ETF) is not the same thing as knowing how to do it optimally. We focus a lot on the optimal here at Kangpan & Co. since we believe even seemingly small Systematic Enhancements can compound into significant benefits to our clients over time. In this case, it’s not just the $645 a year for every $1,000,000 a client has invested in a S&P 500 tracker. It’s the tens of thousands of dollars that translates into when you consider a) that fee difference is lost to the investor every year and b) those fees lost out on reinvested compounding returns.
As a reminder, we do not accept commissions or other forms of direct compensation from any third parties. This post is our own unbiased research and analysis.
Email us if you’d like to discuss anything in more detail or learn more about our services.
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Disclosures:
This content is for educational purposes only and is not an investment recommendation. Employees and clients of Kangpan & Co. may hold positions in securities discussed in this post. Speak with a licensed financial advisor before making any changes to your investments. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.
1. There are other considerations such as differences in liquidity, premium / discount to NAV, etc. that could impact some types of investors such as very active traders
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