If You Plan on Funding a Trump Account With SPY, This $91 ETF Fits Better

Trump Accounts give families a new way to invest for children over a potentially 18-year time horizon, making the fund inside the account nearly as important as the money going into it. For many families, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) will be the familiar point of comparison. The ticker has been synonymous with S&P 500 investing since 1993, and SPY remains one of the largest and most heavily traded ETFs in the world. But for a custodial account designed to compound for nearly two decades, trading liquidity matters far less than keeping costs low.

Why the Default S&P 500 Pick Costs More Than You Think

SPY carries a 0.0945% net expense ratio and is legally structured as a unit investment trust, an older wrapper that cannot reinvest dividends internally between quarterly payouts. In a taxable brokerage account, the fee gap is a rounding error. In a Trump Account meant to compound for 18 years on tiny incremental contributions, the friction is real. A parent choosing SPY out of habit will pay the highest expense ratio in the S&P 500 ETF category on a fund built for institutional trading rather than buy-and-hold custodial money.

The Trump Account rules amplify this. Families may receive contributions from several sources over the life of the account, including employer contributions of up to $2,500 per employee per year under a qualifying Trump Account contribution program. As those deposits accumulate over time, every basis point of fee drag applies to a larger balance year after year, making even small differences in expense ratios more consequential over a long investment horizon.

The Same 500 Stocks for a Fraction of the Fee

The alternative is the SPDR Portfolio S&P 500 ETF (NYSEARCA:SPYM), State Street’s own low-cost counterpart to SPY. It tracks the same benchmark, has the same manager, and holds the same top positions anchored by Apple at 6.59%, Amazon at 3.62%, and Alphabet across two share classes. The expense ratio is 0.02%, roughly a fifth of what SPY charges. On a $1,500 balance, the annual fee difference is trivial in dollar terms, but that is the wrong lens. The right lens is 18 years of compounding on a growing balance, during which SPY siphons off 0.0745 percentage points more each year than necessary.

SPYM is a large, established fund. It holds roughly $153.9 billion in net assets, is structured as an open-end fund that reinvests dividends efficiently, and has tracked the index closely enough that its five-year total return of 87.12% essentially matches VOO’s 87.07% over the same window. Year to date, SPYM is up 14.34%. The fund uses a straightforward index-tracking approach with tight benchmark adherence.

Share Price Matters When You’re Investing $1,500

Second edge: SPYM trades near $91 a share. For reference, the Vanguard S&P 500 ETF (NYSEARCA:VOO) trades near $712.54. Trump Account custodians will vary in whether they support fractional shares, and a $1,500 seed buys roughly two shares of VOO or a comparable SPY position, with meaningful cash left uninvested in either case. That same $1,500 buys about 16 shares of SPYM, letting almost the entire deposit go to work immediately. For an account designed to accumulate small contributions from multiple sources, a $91 share price fits the mechanics better than a $700 one.

The Peer Set and Where SPYM Actually Wins

The comparison extends beyond SPY. Vanguard’s VOO and the iShares Core S&P 500 ETF (NYSEARCA:IVV) both charge 0.03% and 0.03% respectively, so SPYM’s edge over them is one basis point, not seven. That is a slim margin, and either would be defensible. The clean case is against SPY specifically, which is what most parents will search first because it is the ticker they recognize.

The Tradeoffs to Flag

SPY’s advantage is options liquidity and tight bid-ask spreads for institutional-size trades. Both are moot inside a kid’s Trump Account. If you already hold SPY in a taxable account, do not sell it just to buy SPYM, because the capital gains hit will dwarf the fee savings. This swap logic applies only to new money going into a new account.

What to Actually Do in 2027

When the account opens and the $1,500 lands, direct the deposit into SPYM rather than SPY, verify the custodian supports fractional purchases, and set any recurring employer or matching contributions to route to the same ticker. Kiplinger this week ranked the five ETFs currently available for Trump Accounts, and the fee-conscious picks dominate that list for a reason. Over 18 years of compounding, the difference between a 2-basis-point fund and a 9-basis-point fund is meaningful. It represents the price of picking the ticker you already knew instead of the one designed for exactly this job.

Contact [email protected] for any questions or corrections.