VOO vs. SPLG: Which ETF Offers Better Returns?

Are you looking to invest in a low-cost exchange-traded fund (ETF) that can provide high returns? If so, then you may be interested in evaluating the two most popular ETFs in this category: VOO and SPLG. Each has its strengths and weaknesses depending on your investment goals, so it’s important to consider which is best for meeting those objectives. In this blog post, we’ll discuss both funds and compare their performances over time before diving deeper into their differences—rewarding readers who want to make an educated decision as they aim to optimize their portfolio.

Let’s Start With VOO:

VOO is an indexed fund that follows the S&P 500 index, comprised of 500 significant U.S. corporations in market capitalization. As an exchange-traded fund, it aims to present a broad range of U.S. stocks for investors to place passive investments with low fees. As of April 2023, VOO is one of the world’s biggest ETFs, obtaining over $280 billion worth of assets under management.

Pros of investing in VOO:

• Diversification: Investors can gain exposure to a diverse portfolio of 500 large-cap U.S. stocks from various sectors by investing in VOO, which tracks the S&P 500 index. This can help to lower portfolio risk.
• Low fees: The expense ratio of VOO is 0.03%, much lower than the average expense ratio of actively managed mutual funds.
• Passive investment: VOO is an ETF that is managed passively, meaning it doesn’t need active management. This can reduce investor costs and lower the risk of underperformance caused by human error or emotional decision-making.

Cons of investing in VOO:

• Concentration risk: The VOO fund has most of its assets invested in several large-cap stocks. About 28% of the fund’s assets are held in the top 10 stocks. This means that the fund’s vulnerability increases if these stocks do not perform well or experience major volatility.
• Market risk: If you invest in VOO, which is designed to track the S&P 500 index, you should be aware of market risks. This means if the stock market goes through a period of decline, the value of the fund’s assets could decrease.
• No active management: Passive management can have benefits, but it may also restrict the possibility of achieving better returns than actively managed funds when market conditions change or become inefficient.

Investors looking for low-fee investment options in the U.S. stock market can consider VOO as a viable choice. However, they must remain mindful of the potential risks involved with the fund, including market and concentration risks.

What About SPLG?

The SPDR Portfolio S&P 500 ETF is referred to by the ticker symbol SPLG. It is an exchange-traded fund that is intended to mirror the performance of the S&P 500 index. The S&P 500 index comprises 500 large-cap U.S. stocks and is weighted by market capitalization. SPLG aims to offer investors exposure to the wider U.S. stock market and is comparable to other funds that track the S&P 500 index, including VOO, IVV, and SPY. Unlike other funds, SPLG is an SPDR Portfolio ETFs group member. This group consists of low-cost ETFs that aim to provide comprehensive market exposure to U.S. equities, fixed-income, and international equities.

Pros of investing in SPLG:

• Diversification: Investors can use SPLG to track the S&P 500 index, which includes 500 large-cap U.S. stocks from different sectors. This helps to minimize portfolio risk by providing diversified exposure.
• Low fees: The expense ratio of SPLG is only 0.03%, which is much lower than the average expense ratio for actively managed mutual funds.
• Passive investment: The SPLG ETF is managed passively, so investors do not have to pay for active management, which helps to reduce costs and lower the risk of underperformance caused by human error or emotions.
• Tax efficiency: Compared to mutual funds, ETFs are usually more tax-efficient because of their lower turnover and fewer capital gains distributions.

Cons of investing in SPLG:

• Concentration risk: The concentration of SPLG is limited to a few big-cap stocks, where the top 10 holdings represent approximately 28% of the fund’s assets. Due to this concentration, the fund becomes more prone to any notable downturn or instability in these stocks.
• Market risk: The SPLG is created to follow the movements of the S&P 500 index. This implies that market risk is associated with it, indicating that the fund’s asset value may decrease if the stock market experiences a decline.
• No active management: Passive management has its advantages, but it may not perform as well as actively managed funds during market inefficiencies or changing market environments.

Investors looking for an affordable and hands-off way to invest in the U.S. stock market may find SPLG to be a good option. Nevertheless, it’s important to note that there are risks related to the fund’s focus and the market as a whole.

Let’s Help You Make a Choice:

Both funds offer huge opportunities, but choosing the correct one can be difficult. Here are some similarities and differences:

Similarities:

• VOO and SPLG both follow the S&P 500 index, which gives investors access to a varied selection of 500 large-cap U.S. stocks from different industries.
• VOO and SPLG are ETFs that are managed passively and have low expense ratios, making them a cost-effective choice for investing.
• Both VOO and SPLG provide extensive coverage of the U.S. stock market and are suitable for long-term investment approaches.

Differences:

• Holdings: Both VOO and SPLG follow the S&P 500 index, but their portfolios of stocks may differ slightly because of the different replication methods they use.
• Brand: Vanguard, one of the world’s largest and most renowned asset management companies, offers VOO. SPLG is offered by State Street Global Advisors, another well-respected and sizeable asset management firm.
• Concentration: SPLG and VOO differ slightly in terms of their concentration risk. VOO has a higher concentration risk than SPLG since around 28% of VOO’s fund assets are held in its top 10, while around 27% of SPLG’s fund assets are held in its top 10.

Ultimately, deciding between VOO and SPLG may depend on your preference, as the funds are quite similar. If you’re very cost-conscious, then you might prefer SPLG, which has a slightly lower expense ratio than VOO. However, if you highly value brand recognition and reputation, then VOO, offered by Vanguard, a highly esteemed asset management company, may be more to your liking.

Conclusion:

To sum up, VOO and SPLG are two widely used ETFs that mimic the S&P 500 index, giving investors opportunities to invest in a vast array of major American companies. They are passively managed, have low fees, and present extensive coverage of the U.S. stock market. Although their holdings, focus, and name recognition are somewhat different, the variances between VOO and SPLG are negligible, with the decision mostly dependent on the investor’s inclination. For investors seeking an investment strategy with low fees and long-term exposure to the U.S. equity market, VOO and SPLG can be good options.