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VOO vs IVV: Which S&P Index fund is better?

VOO and IVV are two ETFs that track the S&P Index fund. VOO is an ETF offered by Vanguard, and IVV is an ETF offered by BlackRock.

Since both ETFs use the S&P 500 index, they are similar in their portfolio diversification and performance.

Should you invest in IVV or VOO? In this post, we’ll compare VOO and IVV diversification, expense ratio, tax efficiency, and performance to help you decide.

 

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 IVV?

IVV, a.k.a. theiShares Core S&P 500 ETF, is an exchange-traded fund BlackRock offers. IVV aims to provide returns based on the 500 large capitalization stocks on the market, which use the S&P 500 as an index.

IVVVOOEdge
Fund TypeETFETFTie
DiversificationS&P Index TrackingS&P Index TrackingTie
Inception Date20002010Slight Edge to IVV
Number of Holdings503505Tie
Risk RatingModerateModerateTie
Minimum Investment$1.00$1.00Tie
Expense Ratio0.03%0.03%Tie
Tax EfficiencyTie
Tax Loss HarvestingFunds must settle and may need 1-2 days to be available for reinvestmentFunds must settle and may need 1-2 days to be available for reinvestmentTie
Trading & LiquidityDaily trading during Market HoursDaily trading during Market HoursTie
Performance-18.16% in 2022-18.15% in 2022Slight Edge to VOO
Dividend Yield1.55% in 20231.57% in 2023Slight Edge to VOO

 

Diversification – Tie

IVV and SPY both have similar diversification strategies. Both use the S&P 500 Index to produce similar returns as the large market capitalization companies in the United States.

Since both use the S&P 500 Index, we expect the portfolios to be very similar. The table below examines the portfolio diversification for the two ETFs.

11.2010.31
IndustryIVVVOO
Information Technology29.05%28.10%
Health Care12.60%13.20%
Financials12.73%12.70%
Consumer Discretionary10.68%10.60%
Communication Services8.87%8.70%
Industrials8.21%8.30%
Consumer Stables6.27%6.60%
Energy4.11%4.50%
Materials2.39%2.40%
Real Estate2.37%2.40%
Utilities2.39%2.50%
Other0.33%0.00%

 

As demonstrated, every industry falls within 1% for all sectors. Since the sector diversification is nearly identical for both portfolios, neither ETF has an advantage over the other.

Using the table below, let’s examine IVV and SPY’s top 10 holdings.

CompanyIVVVOO
Apple Inc.7.13%7.10%
Microsoft Corp.7.13%7.09%
Amazon.com Inc.3.43%3.42%
NVIDIA Corp2.86%2.85%
Alphabet Inc. A2.09%2.08%
Alphabet Inc Class C1.80%1.79%
Tesla Inc C1.57%1.57%
Meta Platforms Inc Class A1.90%1.89%
Berkshire Hathaway Inc Class B1.77%1.76%
UnitedHealth Group Inc1.41%1.40%
Total31.09%30.95%

 

Both portfolios hold the exact top 10 holdings, with only a 0.20% percent difference in the distribution.

IVVs’ top 10 holdings account for 31.09%, while VOOs account for 30.95%. Both funds have the same diversification strategy and produce very similar portfolios.

 

Minimum Investment – Tie

Both VOO and IVV have a minimum investment of $1 to purchase. Since these are both ETFs, they can be traded on fractional shares, allowing for even the smallest investment.

VOO and IVV can be traded like stocks. You can purchase and trade any amount during traditional market hours. While investment minimums can vary slightly depending on the brokerage company you are using, no minimums are enforced by either fund’s management.

 

Expense Ratio – Tie

The expense ratio of a mutual fund or ETF can impact the overall returns you will experience. IVV and VOO are both low-expense ETFs. They have an expense ratio of 0.03%. This is a very low expense ratio compared to the industry average.

Vanguard ETFs and mutual funds are known for having some of the lowest expense ratios in the industry. Since IVV has the same expense ratio, this is quite impressive.

 

Trading and Liquidity – Tie

Since they are both ETFs, VOO and IVV 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).

ETF’s 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

The tax implications of an investment can have a meaningful 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.

Since both VOO and SPY are ETFs, they offer the same tax advantages and efficiencies.

 

Tax Loss Harvesting – Tie

Tax-loss harvesting is a strategy that involves selling investments at a loss to offset gains (and up to $3,000 in ordinary income). It 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.

Since both IVV and VOO are ETFs they follow the same rules and regulations. This means that they have the same tax-loss harvesting features. You will have to wait for the funds to settle compared to a mutual fund where you could re-invest the same day.

If you prefer the tax-loss harvesting rules of a mutual fund, opting for a similar S&P-indexed mutual fund might be a better option. VOO offers a mutual fund alternative, VFIAX, with a minimum investment of $3,000.

 

Performance & Dividends – Slight Edge to VOO

Next, let’s examine IVV and VOO regarding their dividends and performance. The table below outlines the ETF’s total annual returns.

Total Returns by NAV
YearIVVVOODifference
2022-18.16%-18.55%-0.01%
202128.76%28.66%0.10%
202018.40%18.35%0.05%
201931.25%31.46%-0.21%
2018-4.47%-4.42%-0.05%
201721.76%21.78%-0.02%
201612.16%11.93%0.23%
20151.30%1.35%-0.05%
201413.56%13.63%-0.07%

 

Overall, VOO has outperformed IVV in six of the last nine years by an average of 0.07%. That said, the difference in performance has not been greater than 0.25% for either fund. As such, while VOO has an advantage in total annual returns, this advantage is marginal.

Now, let’s compare IVV and VOO’s cumulative period performance using the table below.

Cumulative Returns by NAV
YearIVVVOODifference
1-Yr21.59%21.57%0.02%
3-Yr10.12%10.11%0.01%
5-Yr9.88%9.88%0.00%
10-Yr11..87%11.87%0.00%

 

VOO and IVV have nearly identical cumulative returns in each period. The final performance measure we will look at is dividend yield.

YearIVVVOODifference
20231.55%1.57%-0.02%
20221.46%1.50%-0.04%
20211.35%1.36%-0.01%
20202.15%1.84%0.31%
20192.00%1.94%-0.06%
20181.80%1.80%0.00%
20171.86%1.89%-0.03%
20162.21%2.06%0.15%
20151.99%1.97%0.02%
20141.80%1.84%-0.04%
20131.83%1.91%-0.08%

Overall, both produce very similar dividend yields; over the last 11 years, the average difference is only 0.03%, with IVV having a slight edge in terms of averages. But overall, VOO has outperformed IVV in six of the last eleven years by an average of 0.04%.

IVV and VOO generate similar performance for total annual returns and dividend yield. While VOO might have a marginal advantage, it’s not substantial enough to choose one fund over another.

 

VOO vs IVV: Where Should You Invest?

VOO and IVV are ETFs that track the S&P 500 to generate similar returns as the large market capitalization companies in the United States.  VOO is an ETF offered by Vanguard, and IVV is an ETF offered by BlackRock.

Because these two ETFs have the same diversification strategy, they have nearly identical 10 top holdings and industry diversification. As a result, VOO and IVV produce similar annual returns and dividend yields.

While VOO has a marginal advantage over IVV in terms of annual performance and dividend yield, the performance difference is not significant enough to give either fund an advantage.

Regarding expense ratio, both funds have an expense ratio of 0.03% and investment minimums.

Overall, VOO and IVV are very similar in terms of diversification, expense ratio, tax efficiency, and performance to help you decide. If you’re deciding between these two ETFs, your choice might be best based on your preferred brokerage company: Vanguard or BlackRock.

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2 thoughts on “VOO vs IVV: Which S&P Index fund is better?”

  1. Total Returns by NAV said VOO has outperformed IVV in six of the last nine years. Actually, 5 of 9. IVV did better 4 years:
    Year IVV VOO Difference
    2022 -18.16% -18.55% -0.01%
    2021 28.76% 28.66% 0.10%
    2020 18.40% 18.35% 0.05%
    2016 12.16% 11.93% 0.23%
    The spread in 2022 should have been 0.39%

    Reply
  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. So after much detailed research and analysis, turns out identical funds are identical. Thanks for the effort, maybe just condense to the last sentence of the article. JK

    Reply

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