IVV vs. VOO | Are These S&P 500 ETFs Overrated or Worthwhile Investments?

The S&P 500 (Standard & Poor’s 500), which tracks the 500 largest publicly traded U.S. companies, is one of the most popular and commonly used indexes to track stock performance. Today, many investors use the S&P …

laptop screen showing stock graph

The S&P 500 (Standard & Poor’s 500), which tracks the 500 largest publicly traded U.S. companies, is one of the most popular and commonly used indexes to track stock performance. Today, many investors use the S&P 500 as a benchmark against their portfolio, and the infamous Warren Buffett himself has often said that ordinary investors should invest in S&P 500 index funds.

With the rise in popularity of S&P 500 exchange-traded funds (ETFs), there is no shortage of options to choose from. Given how crowded the S&P 500 ETF space is, understanding which ones are better for your investing strategy can be difficult and confusing, especially for beginners. That’s why in this article, we’ll break down all the key similarities and differences in two leading S&P 500 ETFs IVV and VOO so you can decide which one is best for you.

An Overview of IVV vs. VOO

Both the iShares Core S&P 500 ETF (IVV) and Vanguard S&P 500 ETF (VOO) track the performance of the S&P 500, so if we look at the funds on a macro level, they are relatively similar in terms of their historical performance, the number of holdings, fund composition, and sector exposure. Since both funds are ETFs, that means you can buy and sell them as if they are individual stocks during trading hours.

Below is a side-by-side comparison of some basic information about the two funds, such as the issuer, expense ratio, and assets under management.

IVV (left) vs VOO (right) (Data from etf.com)
IVV vs VOO

Is There a Difference Between IVV and VOO?

Now that we have given a brief overview of both funds, let’s take a more detailed look at IVV and VOO in a head-to-head comparison.

Issuer

IVV is issued by BlackRock Fund Advisors, an investment advisory firm based out of San Francisco. VOO is offered by Vanguard, one of the largest providers of mutual funds and ETFs globally. An interesting fact about Vanguard is that the company was founded by Jack Bogle, who is credited for pioneering passive investing through index funds. He is known to have created the first index fund.

Inception Date

The inception date for VOO is September 7, 2010, while the inception date for IVV is May 15, 2000.

Trading Volume

IVV has a 90-day average trading volume of 4,390,297 compared to VOO’s 90-day average trading volume of 4,178,578, according to Fidelity. On any given day, IVV typically has a roughly 5.07% higher trading volume than VOO, making it slightly more popular for investors and traders. This also means that IVV likely has a narrower bid-ask spread, which is the difference between the price buyers are willing to purchase the fund, and the price sellers are willing to sell the fund for.

Expense Ratio

The expense ratios for VOO and IVV are both 0.03%. This means that for every $10,000 you invest in VOO or IVV, you are charged $3 in fees. Compared to other ETFs and index funds, such as the SPDR S&P 500 ETF Trust (SPY), this fee is considered relatively inexpensive.

Assets Under Management

As of April 30, 2021, IVV has $278.55B of assets under management, while VOO has net assets of $220.4B, which is about a 26.38% difference.

Fund Composition

Below is a side-by-side comparison of the top ten holdings of VOO and IVV.

Fund Comparison of IVV and VOO (Data from etf.com)

As we can see in the charts, both funds have the same top ten holdings, though the percentages allocated towards each stock slightly vary. Their top ten holdings also disproportionately comprise technology companies, such as Apple, Microsoft, Amazon, Alphabet (Google), and Facebook. In terms of weighting, the top ten holdings make up roughly 27% of both VOO and IVV’s portfolios, which is a significant amount. However, their largest holding, Apple, makes up less than 6% of their respective portfolios, making both funds well diversified for anyone interested in investing in large U.S. companies.

Performance

Because the biggest holdings for VOO and IVV are the same and both funds track the same index, they have relatively similar historical performances.

Below is a comparison of their performances over the course of ten years.

Historical Performance of IVV (left) and VOO (right) (Data from etf.com)

Looking at the charts, we can see that VOO typically slightly outperforms IVV in the past few years. However, the difference is minimal and almost negligible if we are looking at the ten-year timeframe.

Sector Exposure

Next, let’s take a look at the sector exposure for VOO and IVV. In the charts below, we can see that the technology sector makes up about 1/3 of both ETFs’ portfolios, followed by consumer cyclicals, financials, healthcare, and industrials.

Sector Exposure of IVV (left) and VOO (right) (Data from etf.com)

While both ETFs are diversified across different sectors, it is important to note that they have high exposure to FAANG, which are the 5 most innovative and high-growth U.S. companies: Facebook, Apple, Amazon, Netflix, and Google (Alphabet). Critics of S&P 500 ETFs argue that these ETFs give the illusion of diversity due to their overexposure to FAANG and other growth companies that are highly valued. Depending on your interest in the technology sector, keeping this detail in mind will help decide how much to invest in S&P 500 ETFs.

Market Capitalization

IVV is made up of 85.41% large-cap stocks, 14.49% mid-cap, and 0.10% small-cap. VOO is made up of 85.45% large-cap stocks, 14.45% mid-cap, and 0.10% small-cap. The fact that both ETFs have nearly identical holdings in terms of market capitalization comes as no surprise as they are tracking the same index.

Dividend Payout

As of 2021, IVV has a dividend yield of 1.35% paid out quarterly, whereas VOO has a dividend yield of 1.40% paid out quarterly. However, if we look at their dividend payout history, IVV has typically had a slightly better track record than dividends paid out to shareholders.

Investment Minimum

There is currently no investment minimum for either fund. Some brokerages, such as M1 Finance, SoFi Wealth, and Public, also offer the option of buying fractional shares, which means you can begin investing in either fund with as little as $20.

Which S&P 500 ETF Should You Invest in?

After considering all the data, we conclude that you can’t go wrong with either fund. The differences between IVV and VOO are pretty small, so investing in either will result in nearly indistinguishable returns. Both funds have similar historical performances, holdings, sector and market capitalization exposure, and the same expense ratio. Investing in one or the other will not make or break your portfolio. However, because both funds hold many identical assets, you will most likely be better off choosing one and sticking to it, so you do not get double exposure to the same investments.

As a disclaimer, I currently do not invest in either fund. When I first started investing, I put some money in my Roth IRA into the SPDR S&P 500 ETF Trust (SPY). However, I have since moved my money into total market funds, international market funds, and funds focused specifically on the technology and finance sectors. Given my age, work industry, and risk profile, I tend to take on riskier investments, so the bulk of my regular stock portfolio is invested in individual growth stocks.

Other S&P 500 ETFs to Consider

Other S&P 500 ETFs to consider are the SPDR S&P 500 ETF Trust (SPY) and iShares Core S&P 500 ETF (IVV). While SPY has a higher expense ratio, at 0.0945%, SPY is currently the largest S&P 500 ETF in the market, which means a higher trading volume and a smaller bid-ask spread. IVV is another popular S&P 500 ETF with an expense ratio of 0.03%, making it a great option for people interested in investing in large-cap American companies as well.

The Bottom Line

All things considered, there is no right or wrong answer in terms of deciding between Vanguard’s VOO or Blackrock’s IVV. Both are great options that you could invest in.

As an investor, how much you decide to invest in either of these funds depends on your financial goals, risk tolerance, and your level of financial literacy. If you want to be a long-term passive investor and focus on more stable and larger American companies, then either VOO or IVV would be a safe bet for you. If you want to be more diversified, you may want to allocate some of your money towards a total market fund or an international market fund. If you are a risk-taker, then consider handpicking individual stocks after doing your own due diligence. When it comes to investing and building wealth, how you go about your financial journey ultimately depends on your financial preferences and goals.

We are not financial advisors. The content on this website and our YouTube videos are for educational purposes only and merely cite our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Always remember to make smart decisions and do your own research!

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