Why VOO Is Outpacing SPY

Vanguard’s S&P 500 ETF (VOO) is on track to outpace its biggest competitor S&P Global’s SPDR S&P 500 ETF (SPY). Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence highlighted this in his comments to Bloomberg’s Katie Greifeld: “Generally speaking, VOO won the fight for retail assets…” But why though? SPY has been the heavy-weight champion of the ETF markets for as long as I can remember. Why is it falling now?

An Exchange-Traded-Fund (ETF) is an investment fund which holds multiple assets, but can be bought and sold like a regular stock. In my experience, they usually track a part of the market like the S&P 500, small cap stocks (companies with a market cap between $250 million and $2 billion), the Nasdaq, etc.

Originally I was hoping to make this another note on my Substack and LinkedIn. Five graphs later, I have gone on a journey that has helped me understand the ETF markets better and explained to me why my favorite ETF is being outperformed.

Why They’re Different

Gains Don’t Differ

The month-over-month gains are practically the same for both the VOO and SPY ETFs.

The average difference between SPY and VOO was 0.28% from 2020 to 2025. In plain English, that means if both ETFs rose $100 on average for the month:

• SPY investors earn $100
• VOO investors earn $99.72

When I saw this graph, I thought: “Okay, so VOO isn't making more month-over-month, why are they growing?” Well, maybe it has to do with trade volume. That’s how Walmart makes their money right?

Difference In Volume

Since 2020, the SPY ETF has seen an average 3.1% increase in trade volume month-over-month, while VOO has seen a 4.8% decrease in trade volume over the same period. Already, this isn’t agreeing with Bloomberg’s comments about VOO.

The numbers still don’t look good, even when we remove the disastrous drops in trade volume both ETFs saw as of January 1st, 2025 (according to Yahoo Finance Data):

• The SPY trade volume fell by 30.4%
• The VOO trade volume fell by 82%

The average difference in trade volume between 2020 and 2025 was 7.9%. This wasn’t making any sense to me. How was VOO on track to do better than SPY with lower trade volume and lower monthly returns? There was still a chance though, maybe the dividends could tell us a better story.

Sub-Par Dividends

Dividends don’t help the claim that VOO is rising to replace SPY. On average, from 2020 to 2025, SPY and VOO had an average $0.08 difference in dividends. The SPY ETF had an average of $1.39 in monthly dividends, while VOO paid only $1.31.

Both ETFs saw a modest average growth in dividends:

• SPY dividends grew an average of 2.7% month-over-month.
• VOO dividends grew an average of 2.3% month-over-month.

I am starting to see a better story developing here. Despite dropping trade volume and weaker gains, VOO has managed to increase dividends in pace with SPY. That is going to attract increased investment, especially from investors who are looking for more “passive income”. That might also explain why investments are pouring more money into VOO, on average than SPY.

Higher Inflows

The VOO ETF saw an average of $14.24 billion in annual, net cash inflows year-over-year, since 2020. In contrast, SPY only saw an average of $14.16 billion annual, net cash inflows.

On average, VOO increased by $80 million more than SPY every single year since 2020. That left me with one final question, why? What made VOO different enough, that the investors were willing to add $80 million more to that fund, despite poor month-over-month performance? The answer is fees!

Lower Fees Than SPY

One of the conversations I have a lot with active investors revolves around fees and how they affect investment returns. Fees are a drain on your investment returns, and can often be the defining factor between two different investments. VOO and SPY are no different.

The VOO ETF has an expense ratio (the fee you pay) of just 0.03%, about $0.30 for every $1000 invested. SPY on the other hand has a ratio of 0.095%, $0.95, or $0.60 more per $1000 than VOO. All of a sudden, the difference made perfect sense. Consumers are bringing their money to VOO because the fees are much lower than the current champion, SPY.

We’ve talked about this over and over again during the last year. Given current economic conditions in the US, consumers are looking for any way to decrease their costs, even if it’s with $0.60 out of every thousand. Because the dividends are largely the same and have less than a 1% difference in returns, it looks like consumers are choosing the most cost-effective place to store their investments. VOO is offering that. If current economic conditions hold out, we’ll likely see more investors move to VOO.

Closing Thoughts

At the end of everything, I believe that Bloomberg was correct to say the VOO has captured the retail investor market. I’ve learned the difference, and it’s helped me to understand ETFs just a little bit better. Hopefully, it’s helped you understand investing a little more as well.

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Tyler Kreiling, WealthNWisdom, Founder and Head Editor