Three of the world's largest ETFs track the S&P 500 index. SPY is the oldest and most-traded. IVV is BlackRock's iShares product. VOO is Vanguard's. All three own the same 500 US large-cap companies at essentially the same weights, all three are highly liquid, and all three have expense ratios in the single-digit basis points. The differences that determine which to use are usually not the ones people focus on.
The mechanical basics
SPY was launched in 1993 by State Street, making it the first US-listed ETF of any kind and one of the oldest in the world. Its expense ratio is 9 basis points (0.09%). It is structured as a Unit Investment Trust, an older ETF structure with some distinctive features that matter for specific use cases.
IVV was launched in 2000 by BlackRock (then Barclays Global Investors). Expense ratio is 3 basis points (0.03%). Structured as an open-end fund, the more common modern ETF structure.
VOO was launched in 2010 by Vanguard. Expense ratio is 3 basis points (0.03%). Also structured as an open-end fund, but with Vanguard's distinctive share-class structure that allows the ETF to piggyback on the ETF/mutual-fund tax efficiency mechanism.
The expense ratio question, resolved quickly
For long-term buy-and-hold investors, VOO and IVV both cost 3 basis points — six basis points per year cheaper than SPY. On a $100,000 position over ten years, the difference is roughly $600 in cumulative cost, assuming the underlying returns are identical (which they very nearly are).
This is a real difference but is not, for most retail investors, the decisive one. The differences that matter more are structural and situational.
The UIT complication for SPY
SPY's older Unit Investment Trust structure has two consequences. First, it cannot use securities lending revenue to offset its expense ratio the way open-end funds can. Second, it must hold cash between dividend receipt and dividend payment to investors, creating a small "cash drag" that reduces returns marginally.
Neither is a large effect, but both compound over time. Over long horizons, SPY has typically underperformed IVV and VOO by 10–15 basis points per year — a bit more than the expense-ratio gap would suggest, reflecting the structural differences.
The trading liquidity question
SPY is the most liquid ETF in the world by trading volume. Its bid-ask spreads are typically one cent on tens of thousands of shares. Its options market is deeper than any other ETF's by a very wide margin.
For a retail investor placing small orders, this liquidity gap is invisible. For an institutional trader placing very large orders, or for anyone using ETF options extensively, SPY's liquidity advantage matters materially. It is why SPY remains the preferred trading vehicle among professionals despite the higher expense ratio.
The tax structure comparison
All three ETFs generate very small capital-gains distributions relative to comparable mutual funds, but VOO's Vanguard share-class structure has historically produced the smallest. IVV's distributions have been slightly larger but still minimal. SPY's have historically been the largest of the three, though still small in absolute terms.
For taxable accounts held for long periods, this compounds to a small but real advantage for VOO. For tax-deferred accounts (401(k)s, IRAs), the distribution differences are irrelevant.
The broker ecosystem question
Which ETF is easiest to use may depend on the broker. Vanguard clients get commission-free trading of Vanguard ETFs. Fidelity clients get equivalent access to iShares ETFs including IVV. Schwab clients get their own equivalents. In brokerages that charge fees on some ETFs, the "which one to use" question can be settled by which one trades free in the reader's specific account.
The synthesis
If you are a long-term buy-and-hold investor, VOO or IVV at 3 basis points is preferable to SPY at 9 basis points. The choice between VOO and IVV is largely one of broker convenience and personal preference; the returns will be effectively identical over any reasonable horizon.
If you are trading actively, especially with options, SPY remains the standard vehicle for reasons of liquidity that outweigh the expense ratio difference for any short holding period.
If you have a very large position and are optimising taxes, VOO's structural advantages compound to a small but real edge for taxable accounts.
What none of the three tells you
None of them tells you whether owning the S&P 500 is the right decision for your portfolio. That is the much larger question, and once resolved, the choice among three near-identical vehicles is more about operational convenience than about long-run returns.
Educational content only. Not investment advice.