The Vanguard S&P 500 ETF and the SPDR S&P 500 ETF are among the largest exchange-traded funds available to investors. Both funds invest in the S&P 500 index, which includes major technology stocks such as Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, and Tesla.
Investors comparing these two funds should focus on factors like expense ratios and trading spreads. The Vanguard fund charges an expense ratio of 0.03%, while the SPDR fund has an expense ratio of 0.0945%. Over long periods, this difference can compound and affect overall returns.
Another distinction lies in the structure of the products. The Vanguard fund is a traditional open-ended ETF, whereas the SPDR ETF is structured as a unit investment trust. UITs cannot immediately reinvest dividends and often hold small cash reserves, which may lead to a slight performance drag over time.
However, the SPDR fund offers higher liquidity, with about nine times the daily dollar trading volume of the Vanguard ETF. This typically results in lower trading spreads, benefiting frequent traders. For those who trade often, the savings on spreads might offset the higher expense ratio of the SPDR fund.
For most long-term investors, the Vanguard S&P 500 ETF is considered the better choice due to its lower fees. It provides the same exposure to the U.S. stock market as the SPDR fund but at a reduced cost, allowing investors to retain more of their money over the years.
The Motley Fool Stock Advisor analyst team recently identified ten stocks they believe are the best for investors to buy now, noting that Vanguard S&P 500 ETF was not included. Historical examples from their recommendations include Netflix and Nvidia, which generated significant returns for investors who followed their advice.