SPY is different from the other two major S&P 500 ETFs in that it is set up as a unit investment trust which must replicate its index and has limits such as prohibiting lending out underlying shares to other firms. [Comparing Three S&P 500 ETFs]
IVV is the second largest S&P 500 ETF trading. The iShares ETF uses strategies such as derivatives and portfolio lending which allows it to make a small, additional profit. This helps the fund keep pace with the benchmark. The risk is in the portfolio lending, if securities are not returned by the borrowing firm.
VOO has the same freedom as IVV, with stock lending and reinvesting, and cash is invested daily into Vanguard money market funds. Additionally, VOO is the cheapest S&P 500 ETF with a 0.05% expense ratio.
For more information on the S&P 500, visit our S&P 500 category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.