The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is the most-traded exchange-traded fund in the world, but it is far from the cheapest way to own the S&P 500. State Street also quietly runs a near-identical sibling fund called the SPDR Portfolio S&P 500 ETF (NYSEARCA:SPYM) that tracks the exact same index, holds the exact same stocks in the exact same weights, and passes through the exact same dividends. The only meaningful difference is fees, and SPYM charges roughly a fifth of what SPY charges.
For most buy-and-hold investors, SPYM belongs in the same conversation as the two other giants of the category, the Vanguard S&P 500 ETF (NYSEARCA:VOO) and the iShares Core S&P 500 ETF (NYSEARCA:IVV). Each takes a slightly different route to the same destination. Here is how they compare, and why the overlooked SPDR Portfolio product deserves a closer look.
Why SPY Costs More Than Its Peers
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SPY was launched in 1993 as the first U.S.-listed ETF and remains structured as a unit investment trust (UIT). That structure prevents the fund from reinvesting dividends between distributions or lending out its securities for extra income. Both drawbacks translate into a slightly higher all-in cost for shareholders. The fund’s fact sheet lists an expense ratio of 0.0945%, or about 9.45 basis points.
The three alternatives are all open-end funds. They can lend securities, reinvest cash intraday, and generally operate more efficiently. Their expense ratios reflect the difference, with SPYM sitting at 0.02%, VOO at 0.03%, and IVV at 0.03%. SPYM’s fee is roughly 80% below SPY’s, which is where the “identical twin at a fraction of the price” framing comes from.
On a $100,000 investment, that gap works out to roughly $75 per year in fees saved by owning SPYM instead of SPY. Over decades of compounding, those savings can become meaningful. For a trader holding the fund for only a week, however, the difference is negligible.
SPYM: The Overlooked Twin
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SPYM is the standout choice for long-term index investors who want the same S&P 500 exposure as SPY at a lower cost. State Street built its Portfolio ETF lineup to compete aggressively with Vanguard and iShares on fees, and SPYM is one of the clearest examples of that strategy.
The top of the portfolio reads like every other S&P 500 fund, with weights of NVIDIA at 7.57%, Apple at 6.66%, Microsoft at 4.91%, Amazon at 3.64%, and Alphabet’s two share classes combined near 5.4%. Those are the same identical weights that show up in SPY’s disclosure.
Dividends are also functionally identical. SPYM pays quarterly, and its trailing 12-month distributions totaled $0.91 per share, with a forward annualized rate of roughly $0.96. At a recent price near $90, that puts the yield in line with the other three funds, all of which draw from the same underlying dividend stream.
SPYM has returned roughly 12.5% year to date and about 21% over the past year, matching its peers to within a few basis points. The tradeoff is visibility. SPYM has a much smaller asset base than SPY, VOO, or IVV, and options market activity is thin compared with SPY. For an investor who wants to sit on the position for years inside a 401(k) or IRA, none of that matters. For anyone who plans to trade weekly options against the position, it can matter a lot.
VOO: The Retail Favorite
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VOO is the fund most personal finance writers point to when they say “just buy the S&P 500.” It shares Vanguard’s mutualized ownership structure, carries an expense ratio of 0.03%, and has ballooned into one of the largest ETFs on the market. The recent distribution was $1.9622 per share, with a trailing 12-month total of $7.35.
Performance has tracked the index almost perfectly, with the fund up about 12.5% year to date and 20.9% over the trailing year. VOO fits the investor who already lives inside the Vanguard ecosystem or wants the reassurance of the industry’s largest asset base. The one basis point of extra fee versus SPYM is unlikely to change any outcomes over a working career (though on a large balance it can add up).
IVV: The Advisor Workhorse
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IVV is BlackRock’s answer to the same question, priced at 0.03%. It shows up frequently in advisor-managed portfolios and target-date funds because iShares dominates the model portfolio channel. Its recent quarterly distribution was $1.996 per share, with a trailing 12-month total of $8.19.
Year-to-date and one-year returns come in at 12.5% and 20.9%, essentially matching VOO and SPYM. The distinguishing feature is distribution infrastructure. If your advisor uses BlackRock models or your brokerage waives commissions on iShares products, IVV is the natural choice. Functionally, it is interchangeable with VOO and SPYM.
SPY: Still the King for Traders
SPY earns its higher fee only for traders. Its options market is the deepest in the world, bid/ask spreads are the tightest, and it has the most liquid futures and swaps ecosystem wrapped around it. Institutions running short-dated hedges, covered call writers, and active traders rely on SPY precisely because SPYM, VOO, and IVV cannot match its depth. SPY paid a trailing 12-month distribution of $7.52 per share and has returned roughly 20.2% over the past year.
Long-term holders who never plan to write options against the position are paying an extra 6 to 7 basis points a year for liquidity they never actually use.
Which One Fits You
The decision comes down to how you plan to use the fund. Buy-and-hold investors who care mostly about minimizing fees should look hardest at SPYM, which is the cheapest S&P 500 wrapper State Street offers and carries the same holdings as SPY. VOO is the natural pick for Vanguard loyalists and IRA holders who value the largest asset base and deep cost history. IVV suits investors already inside a BlackRock or iShares platform, or those working with an advisor whose models default to iShares products. SPY belongs in the toolkit of anyone who trades options, spreads, or short-term hedges against the U.S. large-cap market. While all four track the same 500 companies, only one of them charges you meaningfully more for the privilege.
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