VOO vs. SPY vs. IVV: The One Factor That Sets These S&P 500 ETFs Apart

The three biggest ETFs in the world right now are the Vanguard S&P 500 ETF (NYSEMKT: VOO), the iShares Core S&P 500 ETF (NYSEMKT: IVV), and the State Street SPDR S&P 500 ETF (NYSEMKT: SPY). Combined, they manage a whopping $2.27 trillion.

Since they all track the same index, it could be assumed that they're all virtually interchangeable. At a high level, they are. Over the long term, you'll get about the same performance. But there is a way to potentially squeeze a little more juice out of the turnip.

The only major differentiator between the three is cost. And by major, I technically mean minor. These S&P 500 ETFs are among the cheapest in the world, so we're only talking basis points of difference in performance. But if you can get the advantage, why not take it?

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VOO vs. SPY vs. IVV: Expenses and fees

Two factors go into a fund's total cost of ownership -- the fund's expense ratio, which is set by the issuer, and the fund's trading spread, which is determined by the market and liquidity.

It's important to look at both numbers because an ultra-low expense ratio doesn't necessarily equate to "cheap." Funds that have low assets under management (AUM) and are thinly traded generally come with higher trading costs. Even if that fund has an expense ratio of 0.10%, for example, the total cost of ownership can make it decidedly average.

But that's not the case with these three ETFs. They are huge and highly liquid. Here's how they stack up against each other.

Data source: Fund websites, ETF Action.

Even the largest funds usually have trading spreads of at least 0.01%. But these ETFs are so big, their trading spreads round down to zero. So there's virtually no differentiation on this front.

But there is a difference in expense ratios. The Vanguard and iShares ETFs are at 0.03%, but the State Street SPDR S&P 500 ETF is more than triple that. Despite the cost disadvantage, it's still favored by big institutional investors because it trades about 10 times the daily dollar volume as the other two. For them, liquidity is the bigger factor.

For retail investors, the expense ratio will be the bigger factor. Given that their total cost of ownership is the same and they trade roughly the same dollar volume daily, there's virtually no difference between the Vanguard S&P 500 ETF and the iShares Core S&P 500 ETF.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.