As two of the largest S&P 500 ETFs on the market, IVV and VOO have a lot to offer. Choosing one over the other can be a difficult choice given the near-identical nature of S&P 500 ETFs. So, which one is best and why?
The differences between IVV and VOO are limited. There are two relevant differences to consider when deciding between the ETFs. First, VOO has 753.41B total assets under management compared to 294.95B for IVV. Second, IVV has a dividend yield of 1.28% whereas VOO’s is 1.34%. VOO is likely a better option for investors.
In this article, I will go into depth as regards the similarities and differences between IVV and VOO and what implications these have for investors.
IVV vs. VOO – Overview
First, we will look at the make-up and composition of IVV and VOO as well as industry exposure. Then, we will look at some risk metrics such as volatility and maximum drawdown before analyzing performance through annual returns and portfolio growth.
What’s The Difference?
|Category||Large Blend||Large Blend|
Both IVV and VOO are Large Blend ETFs, which means that their portfolios are made up of growth and value stocks. Additionally, the stocks held within the ETFs are primarily large-cap companies.
IVV is issued by iShares, an ETF provider managed by BlackRock, the world’s largest asset manager. The company has over $9 trillion in assets under management.
VOO is issued by Vanguard, the world’s second-largest ETF provider and largest mutual fund provider. The company has roughly $7 trillion in assets under management, making it a titan in its industry.
Assets Under Management
IVV has 294.95B total assets under management, making it one of the largest ETFs on the market. VOO has 753.41B total assets under management, making it significantly larger than most ETFs. VOO has grown its assets base more rapidly than any other ETF, having been ranked below IVV for several years.
Both IVV and VOO provide excellent liquidity, but VOO comes out on top given the size of its assets base. There’s no doubt, though, that both ETFs are extremely trustworthy.
IVV has a Year-to-date return of 19.99%, which is only 0.01% less than VOO’s Year-to-date return of 20.00%. Evidently, the returns are almost identical, which is to be expected given that both ETFs track the S&P 500.
This difference is negligible and should therefore not be used as a deciding factor when choosing between IVV and VOO.
IVV has a dividend yield of 1.28% compared to 1.34% for VOO. This difference is not significant when: (1) the investment is small and (2) the investment is only held for a short period of time.
In the long run, a difference of 0.06% may provide the potential for significant gains or losses. As more money is pumped into the ETF over several years, accumulated gains may be significant. Thus, it is worth taking into consideration the dividend yield before making a decision.
Both IVV and VOO have an expense ratio of 0.03%. This is an extremely low expense ratio and should be a strong reason to consider these ETFs over other ones.
The expense ratio is synonymous with fees, so if a portfolio is worth $1000 and the expense ratio is 0.03%, the charge will be 30 cents. This expense ratio is among the lowest on the market.
IVV has a turnover of 5.00%, which is only marginally higher than VOO’s at 4.00%. This difference is not relevant given the nature of the S&P 500.
Although it is often considered good for a fund to have a high turnover indicating that it is actively managed, the S&P 500 reflects the American economy as it includes 500 of the biggest companies in the country. It is, therefore, better if the fund is stable since it shows that the companies are strong, innovative, and modern.
In this section, we will take a closer look at the types of companies that make up IVV and VOO’s funds.
As can be seen from the above pie-chart, 85% of VOO’s fund is in large-cap companies and the remaining 15% is in mid-cap companies. There are no small-cap companies within the fund. This makes sense as the S&P 500 tracks the largest companies in the US.
In a very similar manner, IVV’s fund is only comprised of large-cap and mid-cap companies, at 84% and 16%, respectively. The only difference between the two fund compositions is that 1% more of VOO’s fund is in large-cap companies (and 1% less in mid-cap companies).
The resemblance between the two funds is no surprise as they both track the S&P 500.
Here, we will look at which industries the companies in the ETFs are part of. This is an insightful exercise as it shows how diversified the ETFs are and which industries are likely to have the biggest influence on performance.
The most represented industry within VOO is technology, with nearly 25% of all the companies falling under this category. In second place is the financial services industry which is just under 14%. This is closely followed by the healthcare industry at roughly 13.5%.
In fourth place and fifth place are the consumer cyclical industry and communication services, which both lie between 11-12%. Next is industrials at just over 8.5% and consumer defensive which is just over 7%.
The bottom four are real estate, energy, utilities, and basic materials, which all lie between 2 and 3%.
IVV’s industry exposure is identical to that of VOO. This is, of course, no surprise as both ETFs track the S&P 500. Technology is the most represented industry within the ETFs. Therefore, it has the largest influence on performance. However, the ETFs are quite well diversified overall, with 11 different industries being represented within the funds.
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IVV vs. VOO – Analysis
We will now look at risk metrics in order to compare the risks associated with IVV and VOO. We will be looking at fund volatility and maximum drawdown.
|Arithmetic Mean (monthly)||1.24%||1.24%|
|Arithmetic Mean (annualized)||15.98%||15.98%|
|Geometric Mean (monthly)||1.17%||1.17%|
|Geometric Mean (annualized)||14.99%||14.99%|
|Downside Deviation (monthly)||2.29%||2.29%|
|US Market Correlation||1||1|
IVV and VOO have the exact same volatility. On a monthly basis, volatility is 3.81% and on an annual basis, this figure becomes 13.31%. There is thus no difference between the ETFs in terms of volatility and the same risks are present according to this metric.
From a logical standpoint, this makes sense as the ETFs are exposed to the same industries.
IVV has a maximum drawdown of -19.56%, only marginally less than VOO’s maximum drawdown of -19.58%.
The graph below depicts the annual drawdowns for the two ETFs.
The maximum drawdowns are extremely similar for IVV and VOO. This is no surprise as there is often a correlation between volatility and maximum drawdown.
From the graph, it is virtually impossible to distinguish between the red line (representing VOO) and the blue line (representing IVV). There are only two parts of the graph (around 2013 and 2018) where it becomes somewhat possible to distinguish between the two lines, but the difference is negligible.
It is easy to conclude from the above risk metrics (volatility and drawdowns) that there is no risk associated with one ETF that is not associated with the other. IVV and VOO are exposed to the same risks. This cannot be a deciding factor when choosing between these two ETFs.
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IVV vs. VOO – Performance
In this section, we will take a look at the annual returns for IVV and VOO before comparing portfolio growth.
The graph below depicts the annual returns for the two ETFs over the last decade.
From the graph, it’s clear that the returns are nearly always identical. It is extremely difficult to distinguish between the returns for IVV and VOO. It appears that in 2012 and 2020, IVV outperforms VOO by the smallest of margins, but in 2017 and 2019, the opposite is true.
From the graph, we can conclude that any difference in returns is both negligible and inconsistent.
Lastly, we will analyze portfolio growth for IVV and VOO over the last decade.
We will consider two portfolios of $10,000. In one, 100% of the funds are allocated to IVV. In the other, 100% of the funds are allocated to VOO. We will then look at the accumulated returns over a 10-year period, starting in 2011.
|Portfolio||Initial Balance||Final Balance||CAGR|
The final balance of the IVV portfolio is $44,360.00. This is only $7 less than the final balance of the VOO portfolio, at $44,367.00. Over a 10-year period, this difference is insignificant. As can be expected, the compound annual growth rate is the exact same, at 14.99%.
The graph below shows the growth of the portfolios over the decade.
The graph allows us to reaffirm what was already concluded: there is virtually no difference in the portfolio growth for one ETF compared to the other. It’s impossible to distinguish between the line representing IVV and the line representing VOO.
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Overall, it’s very hard to distinguish between IVV and VOO. There are two metrics that provide some potential for decision-making: assets under management and dividend yield. In both cases, VOO comes out on top.
As VOO has more assets under management, it’s likely to be a lot more liquid than IVV, meaning that buying and selling the ETF is easier for investors. This may work particularly well for investors looking to hold the ETF for a short amount of time.
VOO also has a higher dividend yield (1.34% compared to 1.28%). This difference may not be significant in the short run but may provide significant monetary gains when the ETF is held for a long period in which money is consistently pumped into the investment.
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