How Vanguard’s VOO Quietly Dethroned SPY as the World’s Top ETF

Snapshot VOO’s Quiet Victory

Let’s Talk Numbers

The Tortoise Strategy: Low Fees Compound Quietly

Let’s be honest, saving 6 basis points in expense ratios is not going to garner a lot of attention on Reddit. But over 10 years? That 0.0645% difference between SPY and VOO becomes a real drag.

“Most investors underestimate the burden of fees as they initially seem minor,” Shaun David explains. “It’s not just the 0.06% per year that you need to take into account, it’s 0.06% compounded on gains you didn’t make.”

The numbers never lie, so let’s do the math: if you invest $100,000 and the market returns 9% annually, then the difference between SPY and VOO over 20 years is nearly $19,000 in lost returns, and that’s just from higher fees.

Now imagine you’re Vanguard with 50 million investors.

Fund Flows Tell the Real Story

In 2024, Vanguard’s $VOO pulled in over $116 billion in net new assets. That’s more than any other ETF globally — by a mile.

Meanwhile, $SPY has been bleeding money. Over $22 billion in outflows as traders rotated out, institutions rebalanced, and fee-conscious advisors migrated clients to cheaper options.

“Behavioral flows matter more than performance,” Shaun notes. “The average investor didn’t jump ship because of return gaps. They did it because they finally understood the long-term math of costs.”

VOO became the “set it and forget it” ETF. SPY? Still the trader’s darling — but fading in the eyes of advisors managing grandma’s IRA.

Structure Matters: Why Vanguard Won

SPY is owned and operated by State Street — a for-profit asset manager that collects fee revenue and distributes earnings to shareholders.

Vanguard? It’s mutualized — meaning it’s owned by the very funds it operates. In other words, investors like you and me indirectly own the company. And that means one thing: incentives are aligned.

“Vanguard doesn’t need to please Wall Street,” says Shaun. “They just need to please their investors — and that’s why their fees keep going lower.”

And the result? Stickier money. Fewer redemptions. More long-term trust.

Liquidity Still Belongs to SPY (For Now)

Here’s the one place SPY dominates: daily trading volume. With nearly 10x the average daily volume of VOO, SPY remains the weapon of choice for hedge funds, arbitrage traders, and institutions making billion-dollar moves.

But here’s the twist: those investors don’t care about cost. They care about speed.

“SPY’s liquidity is unmatched,” Shaun says. “But that liquidity doesn’t build loyalty. The moment another fund matches its spread and cost, they’ll switch.”

For retail investors? Liquidity beyond a certain point is meaningless. You’re not placing a $10M order at 9:29 a.m. You’re buying $300 every two weeks. And for that, VOO wins.

Behavior > Alpha

Let’s zoom out.

This moment isn’t just about VOO overtaking SPY. It’s about what investors are waking up to:

This is what Buffett meant when he told his heirs to put 90% of their inheritance into a low-cost S&P 500 fund. Not to maximize gains — but to minimize mistakes.

“The best portfolio isn’t the one with the highest return,” Shaun reminds. “It’s the one you’ll stick with for 30 years.”

Our Verdict: What Should You Do?

If you’re a long-term investor looking to grow wealth passively, VOO is hard to beat. You’ll save more on fees, stay invested longer, and be less tempted to trade.

If you’re an active trader or institutional allocator? SPY still has the edge in liquidity — but it may be time to ask whether that edge is worth the extra cost.

And if you’re just starting out?

“Own the market. Keep it boring. Automate it,” Shaun concludes. “And let compounding work its magic.”

Snapshot of VOO Dominance

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