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

Capital One Financial Corp Achieves #94 Analyst Rank, Surpassing Electronic Arts
Thu, Sep 3, 11:54 AM ET, by ETF Channel

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

MDY, CHD, ALK, JAH: Large Outflows Detected at ETF
Thu, Sep 3, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: MDY, CHD, ALK, JAH Exchange traded funds (ETFs) trade just ...

IWB, PG, PM, UNH: Large Outflows Detected at ETF
Thu, Sep 3, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: IWB, PG, PM, UNH Exchange traded funds (ETFs) trade just ...

IVE, XOM, CVX, WMT: Large Inflows Detected at ETF
Thu, Sep 3, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: IVE, XOM, CVX, WMT Exchange traded funds (ETFs) trade just ...

IWF, DIS, KO, CVS: Large Outflows Detected at ETF
Thu, Sep 3, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: IWF, DIS, KO, CVS Exchange traded funds (ETFs) trade just ...

XLF, COF, BLK, PRU: ETF Inflow Alert
Thu, Sep 3, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: XLF, COF, BLK, PRU Exchange traded funds (ETFs) trade just ...

PKW, FOXA, ORLY, DG: Large Outflows Detected at ETF
Thu, Sep 3, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: PKW, FOXA, ORLY, DG Exchange traded funds (ETFs) trade just ...

FXD, SKX, CVC, FL: Large Outflows Detected at ETF
Thu, Sep 3, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: FXD, SKX, CVC, FL Exchange traded funds (ETFs) trade just ...

FXO, VNTV, PRE, TSS: Large Outflows Detected at ETF
Thu, Sep 3, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: FXO, VNTV, PRE, TSS Exchange traded funds (ETFs) trade just ...

IWR, CCI, AON, MHFI: Large Inflows Detected at ETF
Wed, Sep 2, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: IWR, CCI, AON, MHFI Exchange traded funds (ETFs) trade just ...

DXJ: ETF Outflow Alert
Wed, Sep 2, 11:14 AM ET, by ETF Channel

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

TZA: ETF Outflow Alert
Wed, Sep 2, 11:14 AM ET, by ETF Channel

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

XLI, BA, HON, UNP: ETF Outflow Alert
Wed, Sep 2, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: XLI, BA, HON, UNP Exchange traded funds (ETFs) trade just ...

CIU: Large Outflows Detected at ETF
Wed, Sep 2, 11:14 AM ET, by ETF Channel

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

Why AFLAC is a Top Socially Responsible Dividend Stock (AFL)
Wed, Sep 2, 8:24 AM ET, by ETF Channel

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

GXC Crosses Critical Technical Indicator
Tue, Sep 1, 3:54 PM ET, by ETF Channel

In trading on Tuesday, shares of the SPDR S&P China ETF (GXC) entered into oversold ...

Shares of FXI Now Oversold
Tue, Sep 1, 3:54 PM ET, by ETF Channel

In trading on Tuesday, shares of the iShares China Large-Cap ETF (FXI) entered into oversold ...

International SmallCap Values (DLS) Enters Oversold Territory
Tue, Sep 1, 3:54 PM ET, by ETF Channel

In trading on Tuesday, shares of the International SmallCap Values ETF (DLS) entered into oversold ...

Raytheon Takes Over #91 Spot From Stericycle
Tue, Sep 1, 11:54 AM ET, by ETF Channel

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

Shares of VGK Now Oversold
Tue, Sep 1, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the Vanguard FTSE Europe ETF (VGK) entered into oversold ...

IEV Crosses Critical Technical Indicator
Tue, Sep 1, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares Europe ETF (IEV) entered into oversold territory, ...

Shares of IEUR Now Oversold
Tue, Sep 1, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares Core MSCI Europe ETF (IEUR) entered into ...

EWU Crosses Critical Technical Indicator
Tue, Sep 1, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the iShares MSCI United Kingdom ETF (EWU) entered into ...

KRE, NPBC, GWB, STL: Large Outflows Detected at ETF
Tue, Sep 1, 11:14 AM ET, by ETF Channel

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

EMLC Crosses Critical Technical Indicator
Tue, Sep 1, 11:14 AM ET, by ETF Channel

In trading on Tuesday, shares of the Emerging Markets Local Currency Bond ETF (EMLC) entered ...

10.5% of XLG Holdings Seeing Recent Insider Buys
Tue, Sep 1, 9:44 AM ET, by ETF Channel

A look at the weighted underlying holdings of the Guggenheim Russell Top 50 Mega Cap ...

ProShares Ultra 7-10 Year Treasury (UST) Shares Cross Below 200 DMA
Mon, Aug 31, 3:54 PM ET, by ETF Channel

In trading on Monday, shares of the ProShares Ultra 7-10 Year Treasury ETF (UST) crossed ...

Interpublic Group of Companies Takes Over #86 Spot From Navient
Mon, Aug 31, 11:54 AM ET, by ETF Channel

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

iShares J.P. Morgan USD Emerging Markets Bond ETF Experiences Big Outflow
Mon, Aug 31, 11:14 AM ET, by ETF Channel

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

EWZ: ETF Outflow Alert
Mon, Aug 31, 11:14 AM ET, by ETF Channel

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

IWN, ISBC, BEE, HIW: ETF Inflow Alert
Mon, Aug 31, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: IWN, ISBC, BEE, HIW Exchange traded funds (ETFs) trade just ...

VPU, NEP, UTL, CTWS: Large Outflows Detected at ETF
Mon, Aug 31, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: VPU, NEP, UTL, CTWS Exchange traded funds (ETFs) trade just ...

St Jude Medical Takes Over #112 Spot From EQT
Fri, Aug 28, 11:54 AM ET, by ETF Channel

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

DVY, CME, KMB, CLX: Large Outflows Detected at ETF
Fri, Aug 28, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: DVY, CME, KMB, CLX Exchange traded funds (ETFs) trade just ...

VCR, F, TWC, TGT: Large Outflows Detected at ETF
Fri, Aug 28, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: VCR, F, TWC, TGT Exchange traded funds (ETFs) trade just ...

RSP, CB, TE, CCE: ETF Outflow Alert
Fri, Aug 28, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: RSP, CB, TE, CCE Exchange traded funds (ETFs) trade just ...

VGK: ETF Outflow Alert
Fri, Aug 28, 11:24 AM ET, by ETF Channel

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

Utilities Select Sector SPDR Fund Experiences Big Inflow
Fri, Aug 28, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: XLU, NEE, D, SO Exchange traded funds (ETFs) trade just ...

GDX, GG, FNV, NEM: Large Inflows Detected at ETF
Fri, Aug 28, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: GDX, GG, FNV, NEM Exchange traded funds (ETFs) trade just ...

JNK: Large Outflows Detected at ETF
Fri, Aug 28, 11:14 AM ET, by ETF Channel

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

14.7% of FRAK Holdings Seeing Recent Insider Buys
Fri, Aug 28, 9:54 AM ET, by ETF Channel

A look at the weighted underlying holdings of the Unconventional Oil & Gas ETF (FRAK) ...

LMT a Top 25 Dividend Giant With $2.51B Held By ETFs
Fri, Aug 28, 8:34 AM ET, by ETF Channel

Lockheed Martin Corp. (LMT) has been named as a Top 25 ''Dividend Giant'' by ETF ...

Google Takes Over #2 Spot From Berkshire Hathaway
Thu, Aug 27, 12:14 PM ET, by ETF Channel

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

IEI: Large Inflows Detected at ETF
Thu, Aug 27, 11:14 AM ET, by ETF Channel

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

IVW, NKE, BIIB, KMI: Large Outflows Detected at ETF
Thu, Aug 27, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: IVW, NKE, BIIB, KMI Exchange traded funds (ETFs) trade just ...

Vanguard Total Bond Market ETF Experiences Big Inflow
Thu, Aug 27, 11:14 AM ET, by ETF Channel

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

DGRW, AAPL, MO, MCD: Large Inflows Detected at ETF
Thu, Aug 27, 11:14 AM ET, by ETF Channel

Symbols mentioned in this story: DGRW, AAPL, MO, MCD Exchange traded funds (ETFs) trade just ...

RTH Crosses Above Key Moving Average Level
Thu, Aug 27, 11:14 AM ET, by ETF Channel

In trading on Thursday, shares of the Retail ETF (RTH) crossed above their 200 day ...

10.6% of FAB Holdings Seeing Recent Insider Buys
Thu, Aug 27, 9:54 AM ET, by ETF Channel

A look at the weighted underlying holdings of the First Trust Multi Cap Value AlphaDEX ...

Why Analog Devices is a Top Socially Responsible Dividend Stock (ADI)
Thu, Aug 27, 9:24 AM ET, by ETF Channel

Analog Devices, Inc. (ADI) has been named a Top Socially Responsible Dividend Stock by Dividend ...

  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.