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

EWS Crosses Critical Technical Indicator
Fri, Jul 31, 4:24 PM ET, by ETF Channel

In trading on Friday, shares of the iShares MSCI Singapore ETF (EWS) entered into oversold ...

CMDT Crosses Critical Technical Indicator
Fri, Jul 31, 4:24 PM ET, by ETF Channel

In trading on Friday, shares of the iShares Commodity Optimized Trust ETF (CMDT) entered into ...

COMT Crosses Critical Technical Indicator
Fri, Jul 31, 4:24 PM ET, by ETF Channel

In trading on Friday, shares of the iShares Commodities Select Strategy ETF (COMT) entered into ...

FMF Crosses Above Key Moving Average Level
Fri, Jul 31, 4:24 PM ET, by ETF Channel

In trading on Friday, shares of the First Trust Morningstar Managed Futures Strategy Fund ETF ...

CGW Crosses Above Key Moving Average Level
Fri, Jul 31, 11:14 AM ET, by ETF Channel

In trading on Friday, shares of the Guggenheim S&P Global Water Index ETF (CGW) crossed ...

VGIT Crosses Above Key Moving Average Level
Fri, Jul 31, 11:14 AM ET, by ETF Channel

In trading on Friday, shares of the Vanguard Intermediate-Term Government Bond ETF (VGIT) crossed above ...

Vanguard Short-Term Bond (BSV) Shares Cross Above 200 DMA
Fri, Jul 31, 10:54 AM ET, by ETF Channel

In trading on Friday, shares of the Vanguard Short-Term Bond ETF (BSV) crossed above their ...

TYD Makes Bullish Cross Above Critical Moving Average
Fri, Jul 31, 10:54 AM ET, by ETF Channel

In trading on Friday, shares of the Daily 7-10 Year Treasury Bull 3x Shares ETF ...

DBO Crowded With Sellers
Fri, Jul 31, 10:54 AM ET, by ETF Channel

In trading on Friday, shares of the PowerShares DB Oil Fund ETF (DBO) entered into ...

VDE, COP, OXY, PSX: ETF Outflow Alert
Fri, Jul 31, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: VDE, COP, OXY, PSX Exchange traded funds (ETFs) trade just ...

AOR Crosses Above Key Moving Average Level
Fri, Jul 31, 10:54 AM ET, by ETF Channel

In trading on Friday, shares of the iShares Core Growth Allocation ETF (AOR) crossed above ...

CIU: ETF Outflow Alert
Fri, Jul 31, 10:54 AM ET, by ETF Channel

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

RWX, BAM.A.CA, REI.UN.CA, HR.UN.CA: ETF Inflow Alert
Fri, Jul 31, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: RWX, BAM.A.CA, REI.UN.CA, HR.UN.CA Exchange traded funds (ETFs) trade just ...

15.2% of FRI Holdings Seeing Recent Insider Buys
Fri, Jul 31, 9:34 AM ET, by ETF Channel

A look at the weighted underlying holdings of the First Trust S&P REIT Index Fund ...

HCP Named A Top Socially Responsible Dividend Stock
Fri, Jul 31, 8:14 AM ET, by ETF Channel

HCP, Inc. (HCP) has been named a Top Socially Responsible Dividend Stock by Dividend Channel, ...

BRXX Crowded With Sellers
Thu, Jul 30, 3:54 PM ET, by ETF Channel

In trading on Thursday, shares of the EGShares Brazil Infrastructure ETF (BRXX) entered into oversold ...

IDX Crosses Critical Technical Indicator
Thu, Jul 30, 3:54 PM ET, by ETF Channel

In trading on Thursday, shares of the Indonesia Index ETF (IDX) entered into oversold territory, ...

Shares of DBE Now Oversold
Thu, Jul 30, 3:54 PM ET, by ETF Channel

In trading on Thursday, shares of the PowerShares DB Energy Fund ETF (DBE) entered into ...

Ecolab Achieves #61 Analyst Rank, Surpassing TE Connectivity
Thu, Jul 30, 11:54 AM ET, by ETF Channel

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

First Trust Germany AlphaDEX Fund (FGM) Shares Cross Below 200 DMA
Thu, Jul 30, 11:34 AM ET, by ETF Channel

In trading on Thursday, shares of the First Trust Germany AlphaDEX Fund ETF (FGM) crossed ...

PDP, STRZA, ORLY, DPZ: Large Inflows Detected at ETF
Thu, Jul 30, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: PDP, STRZA, ORLY, DPZ Exchange traded funds (ETFs) trade just ...

IWF: Large Outflows Detected at ETF
Thu, Jul 30, 11:14 AM ET, by ETF Channel

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

FEZ: Large Inflows Detected at ETF
Thu, Jul 30, 11:14 AM ET, by ETF Channel

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

IEMG: ETF Inflow Alert
Thu, Jul 30, 11:14 AM ET, by ETF Channel

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

Exxon Mobil a Top Ranked SAFE Dividend Stock With 3.5% Yield (XOM)
Thu, Jul 30, 8:14 AM ET, by ETF Channel

Exxon Mobil Corp. (XOM) has been named to the Dividend Channel ''S.A.F.E. ...

PX Named A Top Socially Responsible Dividend Stock
Thu, Jul 30, 8:14 AM ET, by ETF Channel

Praxair, Inc. (PX) has been named a Top Socially Responsible Dividend Stock by Dividend Channel, ...

United Technologies a Top 25 Dividend Giant With 2.58% Yield (UTX)
Thu, Jul 30, 8:14 AM ET, by ETF Channel

United Technologies Corp. (UTX) has been named as a Top 25 ''Dividend Giant'' by ETF ...

VPL Makes Bullish Cross Above Critical Moving Average
Wed, Jul 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the Vanguard FTSE Pacific ETF (VPL) crossed above their ...

Vanguard Value Breaks Above 200-Day Moving Average - Bullish for VTV
Wed, Jul 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the Vanguard Value ETF (VTV) crossed above their 200 ...

IWX Crosses Above Key Moving Average Level
Wed, Jul 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the iShares Russell Top 200 Value ETF (IWX) crossed ...

ProShares Short FTSE China 50 Breaks Below 200-Day Moving Average - Notable for YXI
Wed, Jul 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the ProShares Short FTSE China 50 ETF (YXI) crossed ...

VT Crosses Above Key Moving Average Level
Wed, Jul 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the Vanguard Total World Stock ETF (VT) crossed above ...

FEX Makes Bullish Cross Above Critical Moving Average
Wed, Jul 29, 3:54 PM ET, by ETF Channel

In trading on Wednesday, shares of the First Trust Large Cap Core AlphaDEX Fund ETF ...

iShares Core Aggressive Allocation Breaks Above 200-Day Moving Average - Bullish for AOA
Wed, Jul 29, 3:54 PM ET, by ETF Channel

In trading on Wednesday, shares of the iShares Core Aggressive Allocation ETF (AOA) crossed above ...

See How Caterpillar Ranks Among Analysts' Top Dow 30 Picks
Wed, Jul 29, 11:54 AM ET, by ETF Channel

A study of analyst recommendations at the major brokerages shows that Caterpillar Inc. (CAT) is ...

PPA Crosses Above Key Moving Average Level
Wed, Jul 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares Aerospace & Defense Portfolio ETF (PPA) crossed ...

GLDX Crosses Critical Technical Indicator
Wed, Jul 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the Gold Explorers ETF (GLDX) entered into oversold territory, ...

Shares of XOP Now Oversold
Wed, Jul 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the SPDR S&P Oil & Gas Exploration & Production ...

SIJ Makes Notable Cross Below Critical Moving Average
Wed, Jul 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the ProShares UltraShort Industrials ETF (SIJ) crossed below their ...

EPI: Large Outflows Detected at ETF
Wed, Jul 29, 11:14 AM ET, by ETF Channel

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

VIG, MSFT, JNJ, MDT: Large Outflows Detected at ETF
Wed, Jul 29, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: VIG, MSFT, JNJ, MDT Exchange traded funds (ETFs) trade just ...

FVD, TE, MO, LMT: Large Inflows Detected at ETF
Wed, Jul 29, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: FVD, TE, MO, LMT Exchange traded funds (ETFs) trade just ...

KRE, FCNCA, FHN, STL: Large Inflows Detected at ETF
Wed, Jul 29, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: KRE, FCNCA, FHN, STL Exchange traded funds (ETFs) trade just ...

IXJ: ETF Outflow Alert
Wed, Jul 29, 10:54 AM ET, by ETF Channel

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

iShares Short Maturity Bond ETF Experiences Big Inflow
Wed, Jul 29, 10:54 AM ET, by ETF Channel

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

IWB: Large Inflows Detected at ETF
Wed, Jul 29, 10:54 AM ET, by ETF Channel

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

Why HCP is a Top 25 SAFE Dividend Stock (HCP)
Wed, Jul 29, 9:34 AM ET, by ETF Channel

HCP, Inc. (HCP) has been named to the Dividend Channel ''S.A.F.E. ...

Why Merck is a Top Socially Responsible Dividend Stock (MRK)
Wed, Jul 29, 9:34 AM ET, by ETF Channel

Merck & Co., Inc (MRK) has been named a Top Socially Responsible Dividend Stock by ...

TNA: ETF Inflow Alert
Tue, Jul 28, 12:44 PM ET, by ETF Channel

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

AGZ: Large Outflows Detected at ETF
Tue, Jul 28, 12:44 PM ET, by ETF Channel

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

  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 - 2015, 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 serious 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.