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VOO vs CSPX: Which S&P 500 index ETF should you choose?

individuals discussing on which ETF to invest

VOO and CSPX are two S&P 500 Index ETFs. They aim to track the performance of the largest 500 companies on the US stock market.

Since they invest in the same index, they are likely to be very similar. However, VOO is offered by Vanguard, while CSPX is offered by iShares.

 

So which S&P 500 Index is best for you?.

 

In this article, we will compare VOO and CSPX, and you will understand the differences in each index, diversification strategy, expense ratios, and performance.

 

What is VOO?

 

The Vanguard 500 Index Fund (VOO) is Vanguard’s S&P 500 index-tracking ETF offering. It is the ETF alternative to Vanguard’s VFIAX, which is a mutual fund.

 

 

VOO’s main objective is to generate similar overall returns as the market using the S&P 500 as its index. The ETF is inherently diversified and is generally considered safer than holding individual stocks within an index.

 

What is CSPX?

 

TheiShares Core S&P 500 UCITS ETF (CSPX) tracks the performance of the S&P 500 Index. IShares manages ITOT and aims to provide the general performance of the largest 500 multinational companies in the US stock market.

 

CSPX vs. VOO Summary

 

CSPX VOO Edge
Fund Type ETF ETF Tie
Diversification S&P 500 Index S&P 500 Index Tie
Inception Date 2010 2010 Tie
Number of Holdings 509 505 Tie
Risk Rating Moderate Moderate Tie
Minimum Investment $1.00 $1.00 Tie
Expense Ratio 0.07% 0.03% VOO
Tax Efficiency ETFs generally are more tax-efficient ETFs generally are more tax-efficient Tie
Tax Loss Harvesting Funds must settle and may need 1-2 days to be available for reinvestment Funds must settle and may need 1-2 days to be available for reinvestment Tie
Trading and Liquidity Daily trading during Market Hours Daily trading during Market Hours Tie
Performance 26.12% in 2023 26.33% in 2023 VOO slight edge
Dividend Yield 0% in 2023 1.56% in 2023 VOO

 

Diversification – Tie

 

VOO and CSPX are two ETFs that aim to provide exposure to the US stock market by tracking the performance of the S&P 500. Since both these ETFs track the same index, their portfolio composition and top holdings are nearly identical.

 

Industry VOO CSPX
Information Technology 28.90% 29.70%
Health Care 12.60% 12.56%
Financials 12.90% 13.01%
Consumer Discretionary 10.90% 10.28%
Communication Services 8.60% 8.80%
Industrials 8.80% 8.72%
Consumer Staples 6.20% 6.01%
Energy 3.90% 3.81%
Materials 2.40% 2.36%
Real Estate 2.50% 2.35%
Utilities 2.30% 2.18%

 

The table above shows that CSPX and VOO have very similar portfolio compositions in terms of industry. Every industry in the portfolio is within 1% of each other. The top three industries are the same; for VOO, they account for 54%, while CSPX’s top 3 industries account for 55%.

 

By industry, these ETFs are very similar and would have very little difference on your investment.

 

Likewise, we can look at each fund’s top 10 holdings to see how they differ.

 

Company VOO CSPX
Apple Inc. 7.00% 5.86%
Microsoft Corp. 6.96% 6.98%
Amazon.com Inc. 3.44% 3.63%
NVIDIA Corp. 3.04% 4.92%
Alphabet Inc. Class A 2.06% 1.89%
Facebook Inc. Class A 1.96% 2.49%
Alphabet Inc. Class C 1.75% 1.61%
Tesla Inc. 1.71%
Berkshire Hathaway Inc. Class B 1.61% 1.71%
JPMorgan Chase & Co. 1.22%
Broadcom Inc. 1.32%
Eli Lilly & Co. 1.36%
Total 30.75% 31.77%

 

From the table above, we can see the top 10 holdings within each ETF. VOO and CSPX hold 8 of the same top 10 holdings. VOO is slightly less concentrated than CSPX, with 31% of the portfolio being in the top 10 holdings. CSPX, on the other hand, only holds 32% of assets in the top 10 holdings.

 

VOO and CSPX have very similar diversification.

 

Minimum Investment – Tie

 

Both VOO and CSPX require a minimum investment of $1.00. Since these are both ETFs, they can be traded on fractional shares, allowing for even the smallest investment. In addition, since they are both offered by Vanguard, if you already have a brokerage account for Vanguard, you can easily invest in either ETF.

 

Expense Ratio –  VOO

 

VOO’s expense ratio is 0.03%, which is less than half the cost of CSPX’s. CSPX’s expense ratio is 0.07%, which is 0.04% higher than that of VOO.

 

These ETFs offer some of the lowest expense ratios on the market, and you are unlikely to find a lower expense ratio offered by any other ETF. The Industry average ETF expense ratio is approximately 0.25%.

 

Trading and Liquidity – Tie

 

Since they are both ETFs, CSPX and VOO have the same trading and liquidity characteristics.

 

Investors can buy and sell ETFs throughout the day at any time during market hours. This is not the case with mutual funds, which are only traded at the end of the day based on Net Asset Value (NAV).

 

ETFs’ trading flexibility doesn’t come without drawbacks, though—they typically trade at prices slightly different from their NAV. This difference is called a bid-ask spread.

 

ETFs offer an advantage to investors who trade daily or change positions frequently. Since they can trade throughout the day, whereas mutual funds, you have to wait until the day is closed.

 

Tax Efficiency – Tie

 

When comparing two different investment options, it’s essential to consider the tax implications and not only the returns they generate. The tax implications of an investment can have a significant impact on which investment generates higher after-tax returns.

 

Generally, ETFs will have a slight edge from a tax efficiency perspective. ETFs tend to distribute comparatively fewer capital gains to shareholders – these same gains are simply more challenging to manage efficiently from a mutual fund.

 

Overall, VOO and CSPX are considered to have the same level of tax efficiency.

 

Tax Loss Harvesting – Tie

 

As ETFs, both VOO and CSPX have the same rules and regulations.

 

Tax-loss harvesting is a strategy that involves selling investments at a loss to offset gains (and up to $3,000 in ordinary income). Tax-loss harvesting only matters in taxable investment accounts since you aren’t taxed on capital gains in tax-deferred accounts. While this strategy can be implemented using any type of investment (stocks, ETFs, mutual funds, or other property), mutual funds have an advantage because of how they are traded.

 

When you sell an ETF, you’ll have to wait for the funds to settle before reinvesting the proceeds. You may have to wait one or two days before you have access to the funds, commonly called T+2.

 

If you prefer the tax-loss harvesting rules of a mutual fund, opting for a similar indexed mutual fund might be a better option.

 

Performance & Dividends – VOO slight advantage

 

The performance of an investment option is often one of the most critical aspects investors consider.

 

Both of these ETFs are designed to generate returns similar to those of the overall market by tracking the performance of the S&P 500.

 

The table below shows the total annual returns between CSPX and VOO.

 

Year VOO CSPX Delta
2023 26.33% 26.12% -0.21%
2022 -18.15% -19.32% -1.17%
2021 28.66% 29.84% 1.18%
2020 18.35% 17.86% -0.49%
2019 31.46% 31.81% 0.35%
2018 -4.42% -5.93% -1.51%
2017 21.78% 21.56% -0.22%
2016 11.93% 10.42% -1.51%
2015 1.35% 0.95% -0.40%
2014 13.63% 15.16% 1.53%

 

The table above shows that VOO has outperformed CSPX in 7 of the last ten years by an average of 0.79%. On the other hand, CSPX has outperformed VOO in 3 years out of the last ten years by an average of 1.02%.

 

The table below will show the dividend yield for both ETFs.

 

Year VOO CSPX Delta
2023 1.56% 0.00% -1.56%
2022 1.50% 0.00% -1.50%
2021 1.36% 0.00% -1.36%
2020 1.84% 0.00% -1.84%
2019 1.94% 0.00% -1.94%
2018 1.80% 0.00% -1.80%
2017 1.89% 0.00% -1.89%
2016 2.06% 0.00% -2.06%
2015 1.97% 0.00% -1.97%
2014 1.84% 0.00% -1.84%

 

The table shows that CSPX does not pay a dividend. As a result, VOO has a clear advantage in dividend yield.

 

Overall, VOO has a slight advantage in annual returns and a clear advantage in dividend yield.

 

CSPX vs VOO: Where Should You Invest?

 

VOO and CSPX are two of the most popular S&P 500 index ETFs on the market today. Both funds aim to track the performance of the 500 largest companies in the US stock market.

 

These two ETFs are very similar, and there are very few key differences between them.

 

Since ITOT and VOO are both ETFs, they have the same trading and liquidity, tax efficiency, and tax-loss harvesting rules.

 

There are two key differences between VOO and CPSX: the diversification strategy, performance, and expense ratio.

 

VOO has an expense ratio of 0.03%, which is 0.04% lower than CSPX, which has an expense ratio of 0.07%.

 

Both VOO and CSPX have similar diversification. They hold approximately 500 holdings and invest in the same industries within 1% of one another.

The final difference between VOO and ITOT is the annual returns and dividend yield performance.

 

VOO has a slight edge in annual returns. VOO has outperformed CSPX in 7 out of the last ten years by an average of 0.79%. This outperformance is marginal since it is less than 1%.

 

VOO also has a clear edge in dividend yield, with consistent dividend payments, while CSPX does not.

 

Overall, VOO has a lower expense ratio, better annual return performance, and consistent dividend payments, making it a better option than CSPX.

 



 

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1 thought on “VOO vs CSPX: Which S&P 500 index ETF should you choose?”

  1. Excellent review, Thanks

    As far as I know, CSPX reinvests the dividends (accumulating ETF), so I thinks it is difficult to compare it as shown here.
    Moreover – CSPX has a lower tax pay on the dividend – 15% rather than 25/30% in VOO
    Am I wrong?

    Reply

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