Returns of plain-vanilla S&P 500 ETFs do not differ much. Choose SPLG ETF if the tiniest outperfomance matters to you or SPY ETF if you want to trade daily options.
Is investing in S&P 500 a good idea?
S&P 500 is the benchmark index for shares for a reason: it provided steady long-term returns for decades. But recently some better alternatives emerged: Nasdaq-100 for investors ready for higher volatility and possible returns and US Total Market funds for those seeking a bit higher diversification.
Nasdaq-100 has more than 50% weight of Tech companies. They significantly outperformed others during the first two decades of this century and with recent improvements in AI have a chance to continue this run. On the negative side Nasdaq-100 is much more volatile and could have some mean reversion after a recent bull run.
US Total Market funds invest in thousands of companies and their 2003-2022 return was slightly better than S&P 500. During the last century their returns were pretty close, because S&P 500 represents 80% of the total US stock market capitalisation. So diversification difference is not that big and choosing one or another is a matter of personal preference.
S&P 500 vs Mega Сaps and Small Сaps
XLG ETF invests in the 50 largest companies from S&P 500 index. It was launched in 2005, so we will compare a 16 year period. Mega Caps performed a bit better during boom times and a bit worse during bad times. Overall they have more volatility without significant benefit.
Small Caps usually behave in the opposite way: higher returns during stress times and lower – during good times, giving better total return in the end of the XX century. S&P 500 was a clear winner of the last decade and also in 2022.
Which S&P 500 ETF is the best?
There are four plain-vanilla S&P 500 ETFs:
- SPY – SPDR S&P 500 ETF Trust;
- IVV – iShares Core S&P 500 ETF;
- VOO – Vanguard S&P 500 ETF;
- SPLG – SPDR Portfolio S&P 500 ETF.
Their main differences are:
|Assets, bln USD||357.6||291.0||251.8||13.8|
|Average annual return, 2014-2022||10.49%||10.54%||10.55%||10.50%|
|Total return, 2018-2022||56.09%||56.82%||56.44%||57.07%|
Choosing between IVV, VOO, and SPLG in terms of performance is just a matter of personal preference towards ETF providers: BlackRock (iShares), Vanguard or SPDR.
During 2014-2022 period VOO outperformed its competitors by a tiny margin, while during 2018-2022 SPLG delivered a bit better result.
But if you want to trade options, nothing beats liquidity of SPY ETF.