S&P ETFs: VOO vs SPY

S&P ETFs: VOO vs SPY
You may see a lot of people talking or recommending Vanguard S&P 500 (VOO) ETF. This may have you wondering why this is so much more discussed than SPY. Today, I’m going to tell you why I prefer VOO over SPY.
The most important difference is the expense ratio. The expense ratio is the percentage of the fund that the managers take to pay for expenses and their wages. Historically there is no correlation between high fee and high return. SPY expense ratio is 0.09%. VOO expense ratio is 0.03%. While the difference is only 0.06%, that will eat into your returns over a long time horizon or if you have a substantial amount invested. However, depending on which brokerage you invest in, there may be added cost to buying VOO which would offset the savings you would gain. We are not going to go into the math today, as this video is intended to be a beginner video to emphasize why expense ratios matter. When you invest consistently over 30 years, and reach $1 million over those three decades, the difference is going to be about $10,000. Now, you can argue this is insignificant. This brings me to the real crux of what this video is really about.
The takeaway is that expense ratios matter. SPY and VOO should have the exact same performance. The difference in the return is what you are paying for the expense ratio. While these are both ultra-low expense ratio ETFs, not all the investments you could choose are. You can argue the difference between SPY and VOO is negligible, and it sort of is.
I would argue that expense ratios matter even when we are talking about hundredths of a percent. They really matter when we are talking half or a whole of a percent.
Tip: Never buy a fund with an expense ratio higher than 0.5%. The lower the better. You are throwing money away as it's impossible to pick a fund using skill that will beat an index tracker over the long term.
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