SPY vs. IVV: Built to Trade or Built to Hold

Expense-conscious investors and active traders may each find a clear favorite between these two S&P 500 giants.

iShares Core S&P 500 ETF (IVV) and SPDR S&P 500 ETF Trust (SPY) both aim to replicate the S&P 500, but IVV stands out for its lower annual cost, while SPY is renowned for its unmatched trading liquidity.

Both IVV and SPY are giants in the exchange-traded fund world, designed to give investors exposure to the largest 500 U.S. companies. While their portfolios and performance are nearly indistinguishable, differences in cost structure and trading characteristics could matter depending on an investor’s priorities.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

IVV looks more affordable for buy-and-hold investors with its lower 0.03% expense ratio, while SPY costs 0.09% per year. IVV also offers a slightly higher dividend yield, providing a marginally larger income stream.

Performance & risk comparison

What's inside

SPY holds 503 large-cap U.S. stocks spanning all major sectors, with the largest allocations in technology (35%), financial services (13%), and communication services (11%). Top positions include Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT). With nearly 33 years on the market, SPY is one of the most established ETFs available and is known for its deep liquidity, making it a go-to choice for large institutions and active traders.

IVV also tracks the S&P 500, holding a similar mix of 503 companies weighted toward technology, financials, and consumer cyclicals. Its top holdings mirror those of SPY: Nvidia, Apple, and Microsoft. Both funds are free from leverage, currency hedges, or other structural quirks, and both provide broad, diversified exposure to the U.S. equity market.

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

What this means for investors

SPY and IVV provide the same S&P 500 exposure, so the choice is not about market outlook. It is about whether the position is built for long-term efficiency or active execution. IVV is structured for long holding periods, with a lower expense ratio that quietly reduces drag over time. On the other hand, SPY is structured for activity and offers liquidity and depth that support large trades and frequent adjustments.

That structural difference shows up most when markets are moving. SPY’s heavy trading volume and consistent spreads make it easier to enter and exit positions without friction, even during volatile sessions. This matters to investors who trade around events or actively manage exposure. IVV trades efficiently as well, but its advantage lies elsewhere. By keeping costs low and handling distributions cleanly, it favors investors who want exposure without without needing to time trades or manage entries and exits.

For investors, the real question is how much involvement the position demands. IVV fits best as a core holding that compounds steadily with minimal attention. SPY stands out as a flexible instrument when timing, execution, and responsiveness matter. Both mirror the same index. The distinction is whether you value liquidity or efficiency that works quietly in the background.

Glossary

ETF (Exchange-Traded Fund): A pooled investment fund traded on stock exchanges, holding a basket of assets like stocks or bonds.
Expense ratio: The annual fee, expressed as a percentage of assets, that investors pay to own a fund.
Liquidity: How easily and quickly an asset can be bought or sold without affecting its price.
Dividend yield: Annual dividends paid by a fund or stock, shown as a percentage of its current price.
Beta: A measure of an investment's volatility compared to the overall market; 1.00 means equal volatility.
AUM (Assets Under Management): The total market value of assets that a fund or investment manager oversees.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Growth of $1,000 over 5 years: The value a $1,000 investment would reach after five years, including price changes and dividends.
Large-cap: Refers to companies with a large total market value, typically over $10 billion.
Sector: A group of companies in the same industry, such as technology or financial services.
Leverage: The use of borrowed money to increase potential investment returns, which also increases risk.
Currency hedge: A strategy to reduce the impact of currency fluctuations on investment returns.

Eric Trie has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.