Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

Breaking Down The S&P 500 ETF Price War

Wed, Nov 21, 9:15 AM ET, by Michael Johnston

The S&P 500 is one of the most widely-followed indexes in the world, offering exposure to a basket of U.S. stocks that includes many of the world’s largest corporations. As such, the S&P 500 is a core of many long-term, buy-and-hold portfolios; it isn’t uncommon for this index to make up a substantial portion of investing strategies. For investors looking to establish exposure to the S&P 500, there are a handful of ETF options available out there; State Street, iShares, and Vanguard each offer funds linked to this benchmark.

Because the products are generally similar in terms of composition and holdings (the structures of each do feature some nuances), most investors will compare their options based on expenses. Below, we offer up an in-depth analysis of the total expense structure of these three exchange-traded products [sign up for the free ETFdb newsletter]:

Expense Ratios

This is perhaps the easiest comparison to make–and the extent of the cost analysis done by many investors. The expense ratio represents the percentage of assets charged by the fund manager for maintaining the underlying basket of stocks, and will generally reduce the overall performance of the investment by a corresponding amount [see Cheapskate ETFdb Portfolio].

All three S&P 500 ETFs are extremely cheap–among the cheapest ETFs available. But they’re not quite identical; VOO holds a slight advantage over IVV and SPY:

 

Bid-Ask Spread

Another factor that must be considered when evaluating the total cost of S&P 500 ETFs is the bid-ask spread. Because ETFs trade on exchanges like stocks, investors aren’t necessarily able to buy and sell at the exact NAV of the underlying assets. Instead, trades are executed at prices that will clear the market — where buyers and sellers can be matched up [Download 101 ETF Lessons Every Financial Advisor Should Learn].

The less frequently a security trades, the larger the bid-ask spread generally is. That’s important because a large spread means an investor is more likely to buy at a premium or sell at a discount–two scenarios that can impact the total cost paid out of your pocket.

Again, all three S&P 500 ETFs are very liquid–average daily volume ranges from about a million shares (for VOO) to about 150 million (for SPY). And the bid-ask spreads are very close (and very small), but not quite identical:

Commissions

Finally, it’s important to consider the commissions that you’ll pay when executing a trade–whether buying or selling [see All Commission Free ETFs].

Verdict

If you have a Vanguard account, this is a no-brainer; use VOO and get the lowest expense ratio and commission free trading. If you’re on another platform, however, it will depend on the size of your position and the length of your estimated holding period [Download Free Report: How To Pick The Right ETF Every Time].

Assume, for example, that you’re purchasing $100,000 worth of exposure to the S&P 500, and plan on holding for a year. If you have a TD Ameritrade account, here’s what the fees would look like:

ETF Price Shares Purchased Spread Spread Cost Management Fees Commisions Total %
SPY $140 714 $0.01 $7.14 $94.60 $9.99 $111.73 0.11%
IVV $140 714 $0.01 $7.14 $70.00 $0.00 $77.14 0.08%
VOO $65 1,538 $0.02 $30.77 $50.00 $9.99 $90.76 0.09%

Now assume you’re holding a larger amount ($1 million) for a much longer period of time–say 20 years. In this case, the benefit of lower expenses really begins to show (note that this is a very simplified example–we assume that the asset value remains constant):

ETF Price Shares Purchased Spread Spread Cost Management Fees Commisions Total %
SPY $140 7,143 $0.01 $71.43 $18,920.00 $9.99 $19,001.42 0.10%
IVV $140 7,143 $0.01 $71.43 $14,000.00 $0.00 $14,071.43 0.07%
VOO $65 15,385 $0.02 $307.69 $10,000.00 $9.99 $10,317.68 0.05%

As is often the case with ETFs, the right pick for your portfolio will depend on your circumstances. If you’re buying for the long haul, it probably makes sense to minimize management fees through VOO’s rock bottom expense ratio. If you have a shorter time horizon, IVV or SPY might make sense depending on your trade-off between commissions and bid-ask spreads.

Disclosure: No positions at time of writing.


SDI Glossary: "price" Definition
SDI Glossary: "ETFs" Definition
SDI Glossary: "iShares" Definition
This Article's Word Cloud:   Because   ETFdb   ETFs   Every   Free   Management   Spread   Total   Vanguard   about   account   amount   basket   buying   case   commissions   cost   each   expense   exposure   generally   have   holding   identical   important   investors   make   many   million   offer   period   products   quite   ratio   sell   spread   stocks   that   there   this   three   time   total   trade   trades   underlying   very   when   will   your

| More

EQR Named A Top Socially Responsible Dividend Stock
Thu, Dec 18, 9:14 AM ET, by ETF Channel

Equity Residential (EQR) has been named a Top Socially Responsible Dividend Stock by Dividend Channel, ...

GE a Top 25 Dividend Giant With $8.66B Held By ETFs
Thu, Dec 18, 9:14 AM ET, by ETF Channel

General Electric Co (GE) has been named as a Top 25 ''Dividend Giant'' by ETF ...

Shares of GSY Now Oversold
Wed, Dec 17, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the Guggenheim Enhanced Short Duration ETF (GSY) entered into ...

PowerShares Preferred Portfolio (PGX) Shares Cross Above 200 DMA
Wed, Dec 17, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares Preferred Portfolio ETF (PGX) crossed above their ...

QEP Resources Moves Up In Analyst Rankings, Passing Eastman Chemical
Wed, Dec 17, 11:54 AM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

iShares MSCI Taiwan (EWT) Enters Oversold Territory
Wed, Dec 17, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the iShares MSCI Taiwan ETF (EWT) entered into oversold ...

iShares 20+ Year Treasury Bond ETF Experiences Big Inflow
Wed, Dec 17, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: TLT Exchange traded funds (ETFs) trade just like stocks, but ...

ProShares Ultra MidCap400 Experiences Big Outflow
Wed, Dec 17, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: MVV, DDD, AAN, ANF Exchange traded funds (ETFs) trade just ...

PowerShares Variable Rate Preferred Portfolio Getting Very Oversold
Wed, Dec 17, 10:54 AM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares Variable Rate Preferred Portfolio ETF (VRP) entered ...

CHIQ Crowded With Sellers
Wed, Dec 17, 10:54 AM ET, by ETF Channel

In trading on Wednesday, shares of the China Consumer ETF (CHIQ) entered into oversold territory, ...

First Trust Preferred Securities and Income Getting Very Oversold
Wed, Dec 17, 10:54 AM ET, by ETF Channel

In trading on Wednesday, shares of the First Trust Preferred Securities and Income ETF (FPE) ...

Why Procter & Gamble is a Top 25 Dividend Giant (PG)
Wed, Dec 17, 9:44 AM ET, by ETF Channel

Procter & Gamble Co. (PG) has been named as a Top 25 ''Dividend Giant'' by ...

Bullish Two Hundred Day Moving Average Cross - JKI
Tue, Dec 16, 4:24 PM ET, by ETF Channel

In trading on Tuesday, shares of the iShares Morningstar Mid-Cap Value ETF (JKI) crossed above ...

GURU Crosses Critical Technical Indicator
Tue, Dec 16, 3:54 PM ET, by ETF Channel

In trading on Tuesday, shares of the Guru Index ETF (GURU) entered into oversold territory, ...

Starbucks Moves Up In Analyst Rankings, Passing Mylan
Tue, Dec 16, 11:54 AM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

iShares MSCI Poland Capped (EPOL) Enters Oversold Territory
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares MSCI Poland Capped ETF (EPOL) entered into ...

Shares of EWD Now Oversold
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares MSCI Sweden ETF (EWD) entered into oversold ...

INDY Makes Notable Cross Below Critical Moving Average
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares India 50 ETF (INDY) crossed below their ...

Treasury-Hedged High Yield Bond (THHY) Enters Oversold Territory
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the Treasury-Hedged High Yield Bond ETF (THHY) entered into ...

GMF Crowded With Sellers
Tue, Dec 16, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the SPDR S&P Emerging Asia Pacific ETF (GMF) entered ...

VOO, GE, WFC, BRK.B: Large Inflows Detected at ETF
Tue, Dec 16, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: VOO, GE, WFC, BRK.B Exchange traded funds (ETFs) trade just ...

iShares iBoxx $ High Yield Corporate Bond ETF Experiences Big Outflow
Tue, Dec 16, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: HYG Exchange traded funds (ETFs) trade just like stocks, but ...

11.1% of XBI Holdings Seeing Recent Insider Buys
Tue, Dec 16, 9:44 AM ET, by ETF Channel

A look at the weighted underlying holdings of the SPDR S&P Biotech ETF (XBI) shows ...

KO a Top 25 Dividend Giant With $7.78B Held By ETFs
Tue, Dec 16, 8:14 AM ET, by ETF Channel

Coca-Cola Co (KO) has been named as a Top 25 ''Dividend Giant'' by ETF Channel, ...

Boston Properties a Top Socially Responsible Dividend Stock With 2.0% Yield (BXP)
Tue, Dec 16, 8:14 AM ET, by ETF Channel

Boston Properties, Inc. (BXP) has been named a Top Socially Responsible Dividend Stock by Dividend ...

URTH Crowded With Sellers
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the iShares MSCI World ETF (URTH) entered into oversold ...

Brazil Financials (BRAF) Enters Oversold Territory
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the Brazil Financials ETF (BRAF) entered into oversold territory, ...

DSUM Crosses Critical Technical Indicator
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the PowerShares Chinese Yuan Dim Sum Bond Portfolio ETF ...

EGPT Crosses Critical Technical Indicator
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the Egypt Index ETF (EGPT) entered into oversold territory, ...

IPU Crowded With Sellers
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the SPDR S&P International Utilities Sector ETF (IPU) entered ...

ACIM Crowded With Sellers
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the SPDR MSCI ACWI IMI ETF (ACIM) entered into ...

BRAZ Crosses Critical Technical Indicator
Mon, Dec 15, 4:34 PM ET, by ETF Channel

In trading on Monday, shares of the Brazil Mid Cap ETF (BRAZ) entered into oversold ...

NFO Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:24 PM ET, by ETF Channel

In trading on Monday, shares of the Guggenheim Insider Sentiment ETF (NFO) crossed below their ...

MIDU Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:24 PM ET, by ETF Channel

In trading on Monday, shares of the Daily Mid Cap Bull 3x Shares ETF (MIDU) ...

PGF Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the PowerShares Financial Preferred Portfolio ETF (PGF) crossed below ...

JKJ Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Morningstar Small-Cap ETF (JKJ) crossed below their ...

First Trust North American Energy Infrastructure Fund Breaks Below 200-Day Moving Average - Notable for EMLP
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the First Trust North American Energy Infrastructure Fund ETF ...

INDA Crosses Below Key Moving Average Level
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the iShares MSCI India ETF (INDA) crossed below their ...

VXF Makes Notable Cross Below Critical Moving Average
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the Vanguard Extended Market ETF (VXF) crossed below their ...

VB Crosses Below Key Moving Average Level
Mon, Dec 15, 4:14 PM ET, by ETF Channel

In trading on Monday, shares of the Vanguard Small-Cap ETF (VB) crossed below their 200 ...

EXI Crosses Critical Technical Indicator
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Global Industrials ETF (EXI) entered into oversold ...

EWQ Crosses Critical Technical Indicator
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares MSCI France ETF (EWQ) entered into oversold ...

JKF Crowded With Sellers
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Morningstar Large-Cap Value ETF (JKF) entered into ...

Shares of IOO Now Oversold
Mon, Dec 15, 3:55 PM ET, by ETF Channel

In trading on Monday, shares of the iShares Global 100 ETF (IOO) entered into oversold ...

Aetna Moves Up In Analyst Rankings, Passing Baker Hughes
Mon, Dec 15, 12:14 PM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

iShares North American Natural Resources ETF Experiences Big Inflow
Mon, Dec 15, 11:24 AM ET, by ETF Channel

Symbols mentioned in this story: IGE, KMI, OXY, SU Exchange traded funds (ETFs) trade just ...

iShares Russell 3000 ETF Experiences Big Inflow
Mon, Dec 15, 11:24 AM ET, by ETF Channel

Symbols mentioned in this story: IWV, CVS, USB, NKE Exchange traded funds (ETFs) trade just ...

XRT, LB, WFM, ORLY: Large Inflows Detected at ETF
Mon, Dec 15, 11:24 AM ET, by ETF Channel

Symbols mentioned in this story: XRT, LB, WFM, ORLY Exchange traded funds (ETFs) trade just ...

MBB: ETF Inflow Alert
Mon, Dec 15, 11:24 AM ET, by ETF Channel

Symbols mentioned in this story: MBB Exchange traded funds (ETFs) trade just like stocks, but ...

DBO: Large Inflows Detected at ETF
Mon, Dec 15, 11:24 AM ET, by ETF Channel

Symbols mentioned in this story: DBO Exchange traded funds (ETFs) trade just like stocks, but ...

Related videos | all videos »
  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

Breaking Down The S&P 500 ETF Price War | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.