r/Bogleheads • u/billythabeast • 2d ago
VOO vs SPYM
I was wondering why VOO is so popular among long term investors if SPYM tracks the same index but has a lower expense ratio? I understand the difference is minimal but wouldn't it matter over long term?
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u/emaxor 2d ago edited 2d ago
I think SPYM changes it's index from time to time. And it's ticker name too. There's nothing wrong with it, but they tinker with it.
VOO has a perfect record of 0 tinkering. I'd be willing to pay an extra $100 (edit) per $1 million invested to keep busy body managers out of a fund that is supposed to be passive index tracking.
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u/forbiddenlake 2d ago
You are asserting that an S&P 500 ETF has changed the index it follows? Do you have a source?
edit: did not know SPYM wasn't always the S&P 500
The index returns are reflective of the Dow Jones U.S. Large-Cap Total Stock Market Index from fund inception until 07/09/2013, the Russell 1000 Index effective 07/09/2013 until 11/16/2017, the SSGA Large Cap Index effective 11/16/2017 until 1/24/2020 and of the S&P 500® Index effective 1/24/2020 to present.
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u/bogle-headache 2d ago
SPYM, formerly SPLG, has changed its index in the past. But considering it's now called SPYM, I'm guessing it's going to continue tracking the S&P from now on.
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u/Gimme_All_The_Foods 2d ago edited 1d ago
SPYM was recently rebranded from SPLG. VOO has been around longer so more people are familiar with it. While SPYM does have a lower expense ratio, it's only 1 bps, which is a difference of $1 per year for every $10K invested. Not exactly going to move the needle. They make excellent tax-loss harvesting partners though.
Edit: By TLH partners, I meant that they are great substitute funds in the sense that if your goal is to be at a SP500 fund after going something to VV or VTI first, then that is safer path. The IRS has not formally ruled that a TLH from a fund like VOO to SPYM would be considered a wash sale, however.
Edited from 0.01 bps to 1 bps.
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u/and_one_of_those 2d ago
TLH between them might not be a good idea: if they track the exact same index they're arguably identical investments and the IRS might see your sales as a wash.
The typical advice is to trade between similar but not identical funds: S&P 500 into Russell 1000 and so on.
https://www.bogleheads.org/wiki/Tax_loss_harvesting#Substitute_funds
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u/Gimme_All_The_Foods 1d ago
True, I should have reworded that they are great substitute funds in the sense that if your goal is to be at an SP500 fund after going something to VV or VTI, then that is safer. The IRS has not formally ruled that a TLH from VOO to SPYM would be considered a wash sale, however.
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u/and_one_of_those 1d ago
Yes it seems to be unclear just where they draw the line, and probably the odds of being audited over this alone are extremely low. But there's no need to take the chance when moving to a similar-but-not-identical fund is so easy.
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u/lufisraccoon 1d ago
Very minor correction: SPYM is 1 bps lower ER versus VOO, not 0.01 bps. 1 bps is 0.01%.
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u/Gimme_All_The_Foods 1d ago
Good catch, I must have conflated between expense ratio and bps mid sentence lol.
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u/mitchzimmer 2d ago
Do they track different indexes? If not than they are not eligible for TLH. Has to be different index for it to be "materially different" securities.
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u/Gimme_All_The_Foods 2d ago
I've TLH'd between S&P 500 funds in the past and there hasn't been any issues. If you want to play it safe though you could go from VOO to something like VTI or VV, then SPYM. VOO to SPYM is listed as a partner in the wiki too:
https://www.bogleheads.org/wiki/Tax_loss_harvesting#Substitute_funds0
u/mitchzimmer 2d ago edited 1d ago
The issue has already occurred; you may have filed your taxes in error. It is not the brokers obligation to flag this. The IRS has not ruled on this but it's reasonable to assume that two ETF's tracking the same index are "materially identical". For me it's not worth the legal risk, I switch to an ETF that tracks a different index but with heavy overlap.
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u/Gimme_All_The_Foods 1d ago
As far as I know the IRS has still never ruled that such a move would be considered a wash sale. Do you have any backing to your claim that the IRS considers this a wash sale?
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u/mitchzimmer 1d ago
They haven't ruled definitively either way. I would rather err on the side of caution personally.
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u/bogle-headache 2d ago
SPLG started in 2005. VOO started in 2010.
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u/Gimme_All_The_Foods 2d ago edited 2d ago
True, but I meant that VOO has been around longer than SPYM. You are correct that SPLG was first though, which tracked a different index at the time.
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u/buffinita 2d ago
The change to 0.02 is fairly recent like mid 2024
Spym is also a new ticker; was splg…..and splg used to be a russell1000 fund
So voo has been around longer; has been stable and therefore built into memory
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u/Equivalent-Pin-7146 1d ago
I'll do you one better, BKLC has 0.00% ER. Yep, buy and hold the S&P 500 for free.
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u/Kashmir79 MOD 5 2d ago edited 1d ago
0.01% is not even worth typing this thought out. Tracking error for any index fund could easily be more than that. One of these funds will be a couple of basis points better than the other over the long run and you have no way of knowing which. The difference in expense ratio is not significant enough to be a factor in your decision-making.
And if you have less than $1 million invested in a fund, I wouldn’t really worry about anything less than 0.1% ($999/year) for a fund that should be be growing $70-100k/yr on average. It will have no noticeable impact on your goals or your life.
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u/NoTeslaForMe 1d ago
Tracking error and other short-term variations are key. Visualize by comparing their values with reinvestment. Over a period of a year or two, it's about chance which one is better. Over their lifetime, VOO wins.
Maybe the expense ratio changed? But that's a point, too; expense ratios can change, and you can't just shuffle them willy nilly in a taxable account. Vanguard has a reputation for being investor owned and keeping prices low for all funds. People trust them to do that, and that trust and track record is worth more than 0.01%.
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u/AGrimmInPortland 1d ago
Counterpoint: most people that get to this level got there by precisely worrying about such details.
If I can earn 7.1% instead of 7.0%, all else being equal....
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u/Kashmir79 MOD 5 1d ago
Counterpoint - they got there because they understand the relative value of their time and decision making. 7.1% vs 7.0% for someone growing a company may be a consequential decision worth considering. 0.02% vs 0.01% for a working person saving six figures in an index fund is not a good use of time and IMO does not reflect promising wealth creation acumen.
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u/metzgerto 1d ago
No one is questioning a 0.1% difference in fees - that’s meaningful for sure. The difference here is an order of magnitude smaller and no one got rich by chasing 7.01% over 7.00%.
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u/captmorgan50 2d ago
Yea. $1 per $10,000 is a huge difference. That will make or break you.
And this exact same question has been asked at least 2x in the last year…..
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u/Silly_Principle_573 2d ago
SPYM tracks the S&P 500 now but it only landed there in 2020, before that it followed a Russell and an SSGA index. That's why the ticker changed from SPLG, and it's the real reason people stick with VOO. Fund companies swapping indexes is rare but it happens, and you can't undo it if you're holding
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u/Penguin_Life_Now 2d ago
SPYM is much newer, so smaller and less well established
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u/rhino369 2d ago
I think it’s older and SPYM only recently lowered their ER. But I may be wrong on the last part.
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u/GapAccomplished2778 2d ago
> but wouldn't it matter over long term?
don't plan to live that long ...
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u/Run-Forever1989 2d ago
VOO is more well known is the main thing. IVV also has the same expense ratio as VOO but is rarely mentioned. It is probably mostly because VOO went to a .03% expense ratio first so for a time it was the lowest fee available. The choice was basically VOO for lower fees vs. SPY for liquidity. SPYM changed its name and expense ratio relatively recently and it’s just not very well known tbh.
Technically even a tiny difference does add up. Over a 50 year horizon 0.01% adds ~20% to your total return.
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u/ac106 2d ago
Technically even a tiny difference does add up. Over a 50 year horizon 0.01% adds ~20% to your total return.
Can you show the math on this?
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u/Run-Forever1989 1d ago
1.0801^50-1.08^50=0.218
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u/thewarrior71 1d ago
u/Run-Forever1989 u/ac106 that's not 20% more, you need to compare the ending values relative to each other by dividing instead of subtracting:
$1 compounded at 8% for 50 years:
1.08^50 ≈ $46.90$1 compounded at 8.01% for 50 years:
1.0801^50 ≈ $47.12The difference is $0.22, which is 0.46% more, not 20%.
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u/Run-Forever1989 23h ago edited 21h ago
I said it adds 20% to your total return. What you have shown is that it adds 0.46% of your total return to your total return.
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u/thewarrior71 20h ago
Okay, I understand you meant to say it adds 20% of the starting amount to total return. I calculated it as adding 0.46% of the ending amount to total return.
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u/Run-Forever1989 19h ago edited 19h ago
I meant to say exactly what I said. Some people just can’t read or do math.
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u/Persistent_Cafard 2d ago
You hear about VOO more because there's scads of long-term money in it. Also VOO sounds cooler and "V" = 5 in roman numerals, so "5OO." If you are obsessed with basis points, you can try BKLC which tracks something called the Solactive GBS United States 500 Index, and it has 0.0 expense ratio. It's marginally outperformed the S&P the past 5 years (lagging YTD) but there are also some marginal differences in holdings and management. I bought some for fun to see if I could beat VOO.
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u/Free_Cake1116 1d ago
i think it's just a matter of branding. Also, VOO has been in the market for so long that people just see it as the default
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u/Scorface 2d ago
It’s because people are willing to spend an extra $10 for every $1 million they have invested to be able to say VOO and Chill
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u/Dill_Pickles_2020 1d ago
Most of us - or at least a lot of us - have the Vanguard institutional mutual fund version of the S&P 500, so we are "used" to VOO in our 401k accounts. I guess that transfers over to our IRA and Taxable accounts where we have the option to purchase ETFs, and either Vanguard VOO or VTI get the nod for US equities. That being said, John Bogle always spoke highly of State Street. Whether one uses iShares ITOT, State Street SPYM, Schwab, Fidelity, etc... - it's all good.
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u/wandererarkhamknight 2d ago edited 1d ago
For $1million, the difference is $100.