IVV vs. VOO: What’s the difference?
The iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 ETF (VOO) are both passively managed exchange-traded funds (ETFs). That means they’re designed to mirror the S&P 500 index. When you invest in either one, you’re getting exposure to a wide range of large-cap U.S. companies.
These funds are very similar, but some differences exist. This article will highlight the subtle differences between these two popular ETFs so you can make the best decision for your investment goals.
We’ll compare things like expense ratios, dividend yields, historical performance, and risk.
How IVV and VOO are alike
Both IVV and VOO are passively managed ETFs. That means they’re designed to track the S&P 500 instead of trying to beat it with active stock picking. As a result, they have very similar holdings.
The correlation between IVV and VOO is almost perfect (1.00), which means they tend to move in lockstep. Buying both probably won’t help you diversify your portfolio.
Both ETFs are good choices for investors who want broad exposure to the U.S. stock market.
Fees and Fund History
Both IVV and VOO offer super-low expense ratios of 0.03%. That means you won’t lose much of your gains to fees, no matter which you choose.
IVV started trading in 2000, while VOO didn’t launch until 2010. Although they track the same index, IVV has been around longer.
Performance Analysis: Returns and Risk
Let’s take a look at how IVV and VOO have performed, both in terms of returns and risk.
Historical Returns
When it comes to returns, these ETFs are neck and neck.
Year-to-date Returns
Looking at year-to-date returns, you’ll see that they’re virtually the same. For example, both have been around -2.9% recently.
Long-Term Returns
Over the long haul, the returns are also extremely similar. For example, both have had 10-year annualized returns of about 12.5%.
Any minor differences you see likely come down to small variations in how the funds are managed or how closely they track the index.
Risk Metrics
Risk is another important factor to consider.
Volatility
Just like with returns, the volatility of IVV and VOO is nearly identical. This is because they hold the same stocks and track the same index.
Maximum Drawdown
Maximum drawdown, which is the biggest drop from peak to trough, is one area where we see a difference. IVV has a larger maximum drawdown than VOO. This is because IVV has been around longer and has experienced more market ups and downs.
Dividend Yields
Dividend yields are another key metric to consider. Here’s a breakdown:
- Current Yields: IVV tends to offer a slightly higher dividend yield than VOO. For example, IVV might yield 1.36% compared to VOO’s 1.34%.
- Historical Trends: From 2014 to 2024, both ETFs have fluctuated between roughly 1.34% and 2.27%. These changes reflect the dividend payouts of the S&P 500 companies they track.
- Investment Impact: The small difference in dividend yield is unlikely to sway most investors significantly.
What do real investors think?
Online forums are full of investors sharing their experiences and opinions about IVV and VOO. Here are a few recurring themes:
- Transactional portfolios. Some users say it’s tough to judge performance when you’re constantly tweaking your portfolio. Frequent changes can skew the numbers and make it harder to compare investments.
- Sharpe ratio. Investors wonder whether the Sharpe ratio is the right tool for low-risk investments like IVV and VOO. Understanding how the “risk-free rate” affects this ratio is important.
- Performance differences. A few people have noticed that SPY, another ETF that tracks the S&P 500, doesn’t always perfectly mirror the index. This raises questions about how accurately these funds track their targets.
IVV or VOO: Which is right for you?
Consider these factors:
- Investment timeline: If you’re investing for the very long term, IVV’s longer history might appeal to you.
- Trading volume: Both ETFs are liquid, but IVV usually sees slightly more trading.
- Brand preference: Some investors like Vanguard’s reputation for low fees. Others prefer iShares’ long history in the ETF market.
- Diversification: Because IVV and VOO are so similar, neither will add significant diversification to a portfolio already full of large-cap U.S. stocks.
Frequently Asked Questions
Is IVV a good index fund?
Yes, IVV is generally considered a good index fund. It offers broad exposure to the S&P 500, providing diversification across large-cap U.S. companies. Its low expense ratio and high liquidity make it an attractive option for many investors seeking to track the S&P 500’s performance. As with any investment, it’s important to consider your individual risk tolerance and investment goals.
Is IVV the same as S&P 500?
IVV isn’t exactly the same as the S&P 500, but it’s designed to closely track its performance. It’s an exchange-traded fund (ETF) that holds stocks that mirror the composition of the S&P 500 index. Minor differences in tracking may occur due to fund expenses and trading strategies, but the goal is to replicate the index as closely as possible.
What is the expense ratio of VOO to IVV?
Both VOO (Vanguard S&P 500 ETF) and IVV (iShares CORE S&P 500 ETF) have very low expense ratios. As of October 2024, both VOO and IVV have an expense ratio of 0.03%. This means that for every $10,000 invested, you’ll pay $3 in annual fees.
Is VOO the best S&P 500 ETF?
Whether VOO is the “best” S&P 500 ETF is subjective and depends on individual preferences. VOO is a popular choice due to its very low expense ratio and Vanguard’s reputation. However, IVV and SPY (SPDR S&P 500 ETF Trust) are also excellent options with comparable performance and liquidity. The differences are often minimal, and the “best” choice depends on your brokerage platform and specific needs.
To Conclude
IVV and VOO are a lot alike. Both ETFs track the S&P 500, and they have almost exactly the same expense ratios, performance, and risk.
The small differences in dividend yield and maximum drawdown aren’t likely to matter much over the long term.
If you’re trying to decide between IVV and VOO, just pick the one you like better. In the end, the choice often comes down to personal preference.