Which Is the Better S&P 500 ETF, Vanguard's VOO or the iShares IVV?

The Vanguard S&P 500 ETF (NYSEMKT:VOO) and iShares Core S&P 500 ETF (NYSEMKT:IVV) provide nearly identical exposure to large-cap U.S. equities with matching expense ratios and historically similar returns.

These two funds are the heavyweights of the indexing world. Each aims to mirror the S&P 500, providing broad access to 500 of the largest, most established U.S. companies. This approach offers a diversified slice of the American economy, capturing the growth of market leaders across various industries. While they share the same goal, slight differences in issuer, fund age, and asset scale may influence an investor preference.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Both ETFs are exceptionally cost-efficient, charging an expense ratio of just 0.03% annually. This ultra-low fee structure means investors keep nearly all of their returns, paying only $3 for every $10,000 invested. The trailing-12-month dividend yields are also very similar, sitting at 1.1% for the iShares fund and 1.0% for the Vanguard fund, providing a modest stream of passive income alongside capital appreciation.

Performance & risk comparison

What's inside

The Vanguard S&P 500 ETF holds 505 stocks and follows a market-cap-weighted indexing strategy. This means larger companies like Nvidia (NASDAQ:NVDA), which makes up 7.51% of the fund, Apple (NASDAQ:AAPL) at 6.59%, and Microsoft (NASDAQ:MSFT) at 4.30%, have a greater impact on performance. The portfolio leans heavily into technology at 39%, followed by financial services at 11% and communication services at 10%. It was launched in 2010. The Vanguard S&P 500 ETF has paid $7.35 per share over the trailing 12 months, which on its recent ~$710.7 share price works out to a 1.0% yield.

The iShares Core S&P 500 ETF mirrors this structure with 504 holdings. Its top positions include Nvidia at 8.12%, Apple at 6.89%, and Microsoft at 5.56%. Sector concentrations are nearly identical, featuring technology at 37%, financial services at 12%, and communication services at 10%. It was launched in 2000. The iShares Core S&P 500 ETF has paid $8.19 per share over the trailing 12 months, which on its recent ~$776.7 share price works out to a 1.1% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

Investing in the S&P 500 is a foundational component of a stock portfolio. The Vanguard S&P 500 ETF (VOO) and iShares Core S&P 500 ETF (IVV) both offer an efficient way to capture this essential investment building block.

In examining these two funds, they are nearly identical. Each uses a market cap-weighted approach, meaning the largest companies have an outsized impact on the fund’s performance. Their low expense ratios allow for investors to buy and hold over the long term at a minimal cost. So which is the better ETF? The decision comes down to a few key considerations.

Income-focused investors may want to lean towards IVV, since it pays a slightly higher dividend. It’s also the older fund, giving it a longer historical track record, so you can review its performance through various market cycles. Also, IVV engage in securities lending, which means it loans out underlying shares to short-sellers, and passes those net revenues back into the fund. This can provide the ETF with a modest edge on performance over the long term.

VOO is ideal for those who have a brokerage account with Vanguard, making investing in the fund seamless. Its other key strength is the massive $1.7 trillion assets under management, the first ETF to pass the $1 trillion threshold. While both funds are highly liquid, VOO’s larger AUM gives it the financial strength and popularity to help it maintain its low expense ratio.

Robert Izquierdo has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.