Due to these restrictions, SPY may have an inferior long-term track record with its underlying S&P 500 benchmark relative to other similar ETFs. SPY has lagged behind its benchmark index by more than its expense ratio, and the divergence is more prominent during bull markets. SPY has generated an average annualized return of 15.46% over the past five years while the S&P 500 returned 15.60%. The ETF comes with a 0.09% expense ratio.
On the other hand, the Vanguard 500 Index (NYSEArca: VOO) and 17.93 from iShares Core S&P 500 ETF (NYSEArca: IVV) are structured as a Regulated Investment Company, which allow the ETFs to reinvest dividends, engage in securities lending and utilize index futures – activities that may help an ETF lower estimated holdings or diminish the divergence between long-term performance and the underlying S&P 500.
Over the past five years, VOO has shown an average annualized return of 15.56% while IVV had a 15.52% return.
VOO also comes with a cheaper 0.05% expense ratio and IVV has a 0.07% expense ratio. Both the Vanguard and iShares options have also been quickly gaining traction as an alternative, low-cost method for accessing the S&P 500. Investors would probably utilize the two options as a buy-and-hold investments since holding fees have a bigger impact on returns than trading costs.
Consequently, large and fast traders would probably prefer SPY while long-term investors would stick to cheaper VOO or IVV.