Which S&P 500 Fund is the Better Choice: SPY or IVV?

The iShares Core S&P 500 ETF (NYSEMKT:IVV) and the State Street SPDR S&P 500 ETF Trust (NYSEMKT:SPY) track the same index, but IVV offers lower costs and a higher dividend yield.

Both funds are designed to provide investors with broad exposure to large-capitalization U.S. equities by tracking the S&P 500 Index. While the SPDR trust is the industry pioneer with unmatched trading volume, the iShares fund could be more appealing for long-term buy-and-hold portfolios due to its lower carrying costs.

Snapshot (cost & size)

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

Expense ratios represent the primary cost of ownership for these funds. The iShares fund is more affordable at 0.03%, while the SPDR trust costs 0.09% annually. Additionally, IVV provides a slightly higher trailing-12-month dividend yield for income-focused investors.

Performance & risk comparison

What's inside

IVV manages a massive portfolio of 504 holdings. Its largest positions include Nvidia (NASDAQ:NVDA) at 8.04%, Apple (NASDAQ:AAPL) at 7.02%, and Microsoft (NASDAQ:MSFT) at 4.89%. The portfolio is heavily weighted toward Technology at 36.00%, followed by Financial Services at 12.00%, and Communication Services at 11.00%. This fund was launched in 2000 and has a trailing-12-month dividend of $8.06 per share.

The SPDR trust similarly holds 504 stocks with a nearly identical sector profile of 36.00% in Technology, 12.00% in Financial Services, and 11.00% in Communication Services. Its largest positions include Nvidia (NASDAQ:NVDA) at 8.29%, Apple (NASDAQ:AAPL) at 7.09%, and Microsoft (NASDAQ:MSFT) at 5.02%. This trust was launched in 1993 and paid $7.38 per share over the trailing 12 months. Notably, it was the first exchange-traded fund to be listed in the United States.

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

Which looks like the better buy

The iShares Core S&P 500 ETF (IVV) and the State Street SPDR S&P 500 ETF Trust (SPY) can both serve as the cornerstone of any well-constructed portfolio. Here’s how they compare to one another.

First, it’s crucial to note that these two funds track the same index - the benchmark S&P 500. Therefore, there is no significant difference between these two funds in the details. They share the same holdings and are designed to deliver identical returns.

However, there are some subtle differences that can matter.

Most importantly, the funds charge different fees. SPY has an expense ratio of 0.09%. That means that for every $10,000 invested in the fund, investors will pay $9 in fees. IVV, on the other hand, has an expense ratio of only 0.03%, resulting in an annual fee of $3 for every $10,000 invested. Obviously, the more someone invests, or the more their money grows, the larger this difference becomes. An investor with $1,000,000 invested in each fund will pay $900 in fees for SPY but only $300 for IVV.

Granted, both funds’ fees are very affordable, but for cost-conscious investors, IVV has a clear edge.

Another consideration for investors is the fund’s structure. Without getting too far into the weeds, the key distinction is that IVV is better suited to long-term investors, while SPY is probably better for short-term traders who value precise pricing and liquidity.

In summary, both funds are great index-linked options that help investors achieve market-matching returns. While IVV wins on fees, SPY may be better suited to short-term traders.

Jake Lerch has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.