Same Index, Same Fee: How Vanguard’s and iShares’ S&P 500 ETFs Compare

VOO and IVV are two of the largest S&P 500 ETFs in the world, and they are close to identical. Both track the same index of about 500 large US companies, both charge the same 0.03% expense ratio, and both pay dividends every quarter. VOO is run by Vanguard and IVV by BlackRock’s iShares, so the main differences come from the two fund companies behind them.

Because they own the same stocks in the same proportions, their returns have been almost the same since VOO launched in 2010. Any gap between them is usually a few hundredths of a percentage point a year, caused by tiny differences in how each fund handles cash, dividends and securities lending.

This guide explains who runs each fund, how they are structured, how closely they track the index, how they trade, how they are taxed, and how investors choose between them. It also explains why holding both rarely adds anything, and why they are a risky pair for tax-loss harvesting.

Start Here: Learn With FRC

Financial Regulation Courses (FRC) has no stake in which fund you choose. FRC sells no investments and earns no commission, so this comparison focuses on how the two funds work and what separates them.

For video explainers on the most widely held ETFs, the FRC Retail Investing video series covers VOO, IVV and many others. FRC’s ETF Investing for Beginners course explains how index ETFs work, followed by ETF Investing Strategies and Advanced ETF Investing.

FRC’s programs and memberships are open to everyone. If ETFs are new to you, FRC’s guide to everything you need to know about ETFs covers their history and how they work.

VOO vs IVV at a Glance

On almost every line that affects an investor’s results, the two funds are the same. The differences sit in the structure and the company behind each fund.

A Brief History of Both Funds

IVV launched on May 15, 2000, making it ten years older than VOO. It was one of the early iShares funds and later became part of the iShares Core range, a lineup of low-cost building-block ETFs aimed at long-term investors.

VOO launched in September 2010 as an ETF share class of the Vanguard 500 Index Fund. That mutual fund, started in 1976, was the first index fund offered to individual investors and is closely tied to Vanguard founder John Bogle.

Both funds have cut their fees over the years as competition for S&P 500 investors intensified. Today they charge exactly the same, and together with SPY they form the three largest S&P 500 ETFs. FRC’s comparison of SPY vs VOO explains how the oldest of the three differs.

Who Runs Each Fund: Vanguard and BlackRock

Vanguard is owned by its US funds, which are in turn owned by the investors in those funds. This mutual ownership structure is the reason Vanguard has long focused on lowering costs, since there are no outside shareholders to pay.

BlackRock is a publicly traded company and the world’s largest asset manager. Its iShares business is the largest ETF provider globally, offering hundreds of funds across stocks, bonds and commodities.

For investors, the ownership difference has little practical effect on these two funds. Both firms are regulated by the SEC, both keep fund assets with independent custodians, and both run the S&P 500 at the same low cost.

What They Own: The Same Index

Both funds track the S&P 500, an index of about 500 of the largest US companies selected by a committee at S&P Dow Jones Indices. Companies must meet requirements for size, liquidity and profitability to be included.

The index is weighted by market capitalization, so the largest companies carry the most weight. A small group of giant technology and communication companies makes up a large share of both funds.

Because they follow the same index, VOO and IVV own the same companies in almost exactly the same proportions. FRC’s guide to how to invest in the S&P 500 explains how the index is built and how investors gain exposure to it.

How Each Fund Is Structured

Both VOO and IVV are open-end funds registered under the Investment Company Act of 1940. That means each can reinvest dividends from the stocks it owns straight away and can lend out its holdings to earn extra income.

This is a key difference from SPY, which is structured as a unit investment trust. SPY must hold dividends in cash until it pays them out and cannot lend its securities.

The structural difference between VOO and IVV themselves is subtler. IVV is a stand-alone exchange-traded fund, while VOO is one share class of a larger fund that also has mutual fund share classes.

The Vanguard Share-Class Structure

Vanguard held a patent for many years on offering an ETF as a share class of an existing mutual fund. The patent expired in 2023, and other fund companies have since sought approval to use similar structures.

The share-class structure lets VOO share one large portfolio with the Vanguard 500 Index Fund’s mutual fund shares. That scale helps spread costs across a very large pool of assets.

There is one theoretical drawback. Because the ETF and the mutual fund share a portfolio, heavy selling by mutual fund investors could in rare cases force the fund to sell stocks and distribute capital gains. In practice, Vanguard’s ETF share classes have used the ETF creation and redemption process to keep capital gains distributions on broad funds like VOO very low.

The Cost: Identical

Both funds charge an expense ratio of 0.03%, or $3 a year for every $10,000 invested. IVV’s prospectus shows a management fee of 0.03% with no other expenses.

That puts both funds among the cheapest ETFs available anywhere. On a $100,000 investment, each costs about $30 a year.

Because the costs are identical, fees are not a reason to choose one over the other. The real cost differences come from trading spreads and tracking, which are also tiny for both funds.

Tracking: How Closely They Follow the Index

No index fund matches its index perfectly. Fees, cash held for dividends, trading costs and the timing of index changes all create small differences known as tracking difference.

VOO and IVV both track the S&P 500 very closely. Over most periods, each has trailed the index by roughly its expense ratio, and sometimes by less, thanks to income from securities lending.

The gap between VOO and IVV in any given year is usually a few hundredths of a percentage point, sometimes in one fund’s favor and sometimes in the other’s. Over decades, those differences tend to balance out and are far smaller than the effect of market movements.

Securities Lending

Both funds can lend shares of the stocks they own to other market participants, such as short sellers, in return for a fee. This securities lending income helps offset the fund’s costs.

The lending is backed by collateral, and both firms set rules on how much of a fund can be on loan. Vanguard runs its program on an at-cost basis and returns the net revenue to its funds, while BlackRock’s lending agent keeps a share of the revenue under a fee split disclosed in the fund documents.

For broad S&P 500 funds, lending income is small because most of the stocks are easy to borrow. It is one of the reasons the two funds can track slightly differently, but it rarely moves results by much.

Trading: Liquidity and Spreads

Both funds trade millions of shares every day and have very tight bid-ask spreads, usually just a penny or so. For long-term investors buying and selling a few times a year, trading costs are negligible for both.

SPY remains the most heavily traded of the three S&P 500 ETFs and is favored by active traders and options users. VOO and IVV are more commonly used by buy-and-hold investors.

The underlying liquidity of both funds is even deeper than their trading volume suggests. Because they hold the most liquid stocks in the world, large investors can create or redeem shares easily when needed.

How ETF Shares Are Created

ETF shares are created and redeemed by large financial firms called authorized participants. When demand rises, these firms deliver a basket of stocks to the fund in exchange for new ETF shares, and the process works in reverse when investors sell.

This in-kind process keeps each fund’s market price very close to its net asset value. It also lets the fund pass out low-cost-basis shares during redemptions, which is why both VOO and IVV rarely distribute capital gains.

Both funds use the same mechanism and benefit from it equally. FRC’s guide to how ETFs are regulated and traded explains the process in more detail.

Dividends From VOO and IVV

Both funds pay dividends quarterly, passing on the dividends paid by the S&P 500 companies they hold. Their yields are almost identical, since they own the same stocks.

The exact amount of each quarterly payment can differ slightly between the two, because each fund times its payments and handles cash a little differently. Over a full year, the totals are very close.

FRC’s guide to when VOO pays dividends explains its ex-dividend schedule. IVV follows a similar quarterly pattern, with payments typically made in March, June, September and December.

Taxes on VOO and IVV

Both funds are highly tax-efficient. As low-turnover index ETFs using the in-kind creation and redemption process, they have rarely distributed capital gains.

Most of the dividends from both funds are qualified dividends, taxed at the lower long-term capital gains rates if you meet the holding period. FRC’s guide to qualified vs non-qualified dividends explains the difference.

Both funds suit taxable brokerage accounts as well as IRAs and 401(k) plans. FRC’s guides to tax-efficient ETFs for a taxable brokerage account and how to minimize capital gains tax cover how to keep tax bills low.

Tax-Loss Harvesting: A Caution

Tax-loss harvesting means selling an investment at a loss to claim a tax deduction, then buying something similar to stay invested. The wash sale rule disallows the loss if you buy a substantially identical security within 30 days before or after the sale.

The IRS has never published a precise definition of substantially identical for funds. However, VOO and IVV track exactly the same index, hold the same stocks and charge the same fee, which makes them a much riskier swap than two funds tracking different indexes.

Many practitioners prefer to pair an S&P 500 fund with a fund that tracks a different index, such as a total market fund. FRC’s comparison of VOO vs VTI explains that pairing, and FRC’s guide to what a wash sale is covers the rule. Investors planning to harvest losses should take professional tax advice.

How They Compare With SPY

SPY, the SPDR S&P 500 ETF Trust, launched in January 1993 and was the first US-listed ETF. It charges 0.0945%, roughly three times the fee of VOO or IVV.

SPY’s unit investment trust structure means it cannot reinvest dividends between payouts or lend its securities. That has historically caused it to lag VOO and IVV slightly over long periods.

SPY’s advantage is trading activity. Its enormous volume and deep options market make it the main tool for active traders, while VOO and IVV are generally preferred for long-term holdings.

Worked Example: Investing $100,000

An investor puts $100,000 into an S&P 500 ETF for 20 years. In VOO or IVV, the annual fee would start at about $30, rising as the investment grows.

Because the funds hold the same stocks and charge the same fee, the investor would likely end up with almost the same balance in either one. The difference over 20 years would most likely be a small fraction of 1% of the final value.

If the same investor chose SPY instead, the extra 0.0645% a year in fees would cost more. On a portfolio growing at 8% a year, that fee gap alone adds up to roughly $5,500 over 20 years, before considering SPY’s other structural drag.

Worked Example: Choosing by Brokerage

An investor with an account at Vanguard may prefer VOO simply because it sits alongside their other Vanguard funds. An investor at another brokerage may lean towards IVV because of the iShares funds they already own.

Both funds trade commission-free at most major US brokerages, so in most cases the choice does not affect costs. Some investors simply pick whichever fund their brokerage features in its model portfolios.

The more important decision is how much to put into US large companies, and how to combine that with international stocks and bonds. Choosing between VOO and IVV comes a distant second.

Who Tends to Choose VOO

Investors who already use Vanguard for other funds often choose VOO to keep their holdings in one family. It is also a common choice for followers of Vanguard’s low-cost investing approach.

Investors who prefer Vanguard’s investor-owned structure sometimes choose VOO for that reason. They see it as better aligning the company’s interests with fund shareholders.

VOO’s mutual fund sister, the Vanguard 500 Index Admiral Shares, also gives investors the option of holding the same portfolio as a mutual fund in some accounts.

Who Tends to Choose IVV

Investors who build portfolios from iShares Core funds often choose IVV as their US large-company holding. The iShares Core range includes total market, international and bond funds that pair naturally with it.

Some investors prefer IVV because it is a stand-alone ETF and not tied to a mutual fund share class. Others simply choose it because it was the first S&P 500 fund they bought.

IVV is also widely used by financial advisers and in model portfolios at many brokerages, which helps keep its trading volume high.

Can You Own Both?

You can, but it adds nothing. Because VOO and IVV hold the same stocks in the same proportions, owning both is the same as owning more of one.

Some investors end up with both because they hold accounts at different brokerages or inherited one of them. That causes no harm, but there is no diversification benefit.

A more effective way to broaden either fund is to add exposure the S&P 500 does not provide, such as small companies, international stocks or bonds. Those holdings behave differently and genuinely spread risk.

Other S&P 500 Funds

Several other low-cost funds track the S&P 500. State Street’s SPDR Portfolio S&P 500 ETF and Schwab’s SWPPX mutual fund offer the index at very low cost, and Fidelity’s FXAIX mutual fund is one of the cheapest S&P 500 funds available.

FRC’s guide to Fidelity index funds covers FXAIX and its sister funds. For most investors, any of these large, low-cost S&P 500 funds will produce very similar results.

Investors who want growth-heavy exposure beyond the S&P 500 often look at the Nasdaq-100. FRC’s comparison of S&P 500 vs Nasdaq explains how the two indexes differ.

The Risks of Both Funds

Both funds are 100% invested in US large-company stocks and will fall when the market falls. In a severe bear market, both could lose a large share of their value.

Both are concentrated in a handful of giant companies, many of them in technology. When those companies struggle, both funds feel it equally.

Neither fund holds small companies, international stocks or bonds. Investors relying on either fund alone are betting entirely on the largest US companies.

Is Your Money Safe in VOO or IVV?

Both funds are regulated investment companies overseen by the SEC, with their holdings kept by independent custodians and separate from the fund companies’ own assets. FRC’s guide to Is Vanguard Safe? explains how Vanguard is structured and regulated.

When you hold either fund at a SIPC member brokerage, your account is protected up to $500,000, including $250,000 in cash, if the brokerage fails and assets are missing. This protection does not cover market losses.

Like all stock funds, both VOO and IVV will rise and fall with the market. Their safeguards protect the safekeeping of your investments, not their value.

Keep Learning

VOO and IVV show that when two funds track the same index at the same cost, the choice between them comes down to convenience. Understanding why helps you focus on the decisions that shape your results, such as how much to invest and how to diversify.

The FRC dictionary is more than a dictionary. It is a library of explainer videos, written explanations and on-page quizzes, so you can open any term, such as index fund, and go deeper whenever something is unclear.

FRC’s programs and memberships are open to everyone. FRC’s Investing for Beginners guide is a natural next step if you are building your first portfolio.

Your Next Step

VOO and IVV track the same S&P 500 index for the same 0.03% fee, and their returns have been almost identical. The differences come from the companies behind them, Vanguard and BlackRock, and from small structural details that rarely change results.

Pick whichever fits your brokerage and the rest of your portfolio, avoid using the pair for tax-loss harvesting, and focus on investing consistently over time.