Is the S&P 500 or VOO Better?

Imagine the S&P 500 is the official recipe for America’s most popular cake. The recipe itself is just a list of ingredients and instructions—you can’t eat the piece of paper it’s written on. In the world of investing, this “recipe” is called an index, and it simply tracks the performance of the 500 largest U.S. companies. You can follow it, but you can’t buy it directly.

To actually enjoy the cake, you need a baker to make it. This is where a fund like VOO comes in. Think of VOO as the finished cake, made by a famous, low-cost bakery (Vanguard) that follows the S&P 500 recipe perfectly. It’s a product you can actually purchase, bundling all 500 of those companies into one simple investment.

This distinction between the index (the blueprint) and the fund (the finished product) is a foundational concept for new investors. When you hear experts say to “buy the market,” this is what they mean in practice.

What Exactly Is the S&P 500? (Hint: It’s Not a Stock)

You’ve likely heard the term “S&P 500” on the news, usually when a reporter says “the market is up today.” The key is that the S&P 500 isn’t a company or a stock you can buy. It’s simply a list—an index that acts like a report card for 500 of the largest public companies in the United States.

This list’s main job is to give us a quick snapshot of the stock market’s overall health. When the value of these 500 companies goes up on average, the S&P 500 index rises with it. Because it tracks corporate giants like Apple, Amazon, and Microsoft, it gives a great sense of how the biggest players in the U.S. economy are performing.

So, how do you “invest in the S&P 500” if it’s just a list? You do it by buying a product built to copy it.

Meet the ETF: Your ‘Shopping Basket’ for the Stock Market

So, how do you buy the “cake” baked from the S&P 500 recipe? The most popular way is with a product called an Exchange-Traded Fund, or ETF. An ETF is a fund you can buy and sell on the stock market, just like you would a single share of a company like Nike or Starbucks.

An ETF is like a pre-filled shopping basket. Instead of going through the impossible task of buying 500 different stocks one by one, you can simply buy a single S&P 500 ETF. That one purchase gets you the entire basket, which already holds small pieces of all 500 companies.

This instantly gives you what investors call diversification. By owning a tiny sliver of hundreds of companies, your investment isn’t tied to the fate of just one. It’s a simple, powerful way for beginners to invest in the whole market at once.

So, Where Does VOO Fit Into the Picture?

If an S&P 500 ETF is the “shopping basket,” then different ETFs are like different brands of baskets. VOO is simply the stock market nickname—or ticker symbol—for a specific S&P 500 ETF offered by Vanguard, one of the world’s largest investment companies.

The relationship is like cola and Coke. “Cola” is the general category, but at the store, you buy a specific brand like Coca-Cola. Similarly, an “S&P 500 ETF” is the category, and VOO is a hugely popular brand you can actually purchase.

When you’re ready to invest on a brokerage app or website, you don’t search for “S&P 500.” Instead, you type in the ticker symbol: V-O-O. That action tells your broker exactly which “basket” you want to buy.

The Tiny Fee That Makes VOO a Great Deal: The Expense Ratio

The factor that makes VOO so popular is its expense ratio. Think of it as a small annual service fee that Vanguard charges for the convenience of packaging and managing your “basket” of 500 stocks. You’re paying for the work of ensuring the fund perfectly tracks the S&P 500, and the goal is to pay as little as possible for that service.

For the Vanguard S&P 500 ETF (VOO), the expense ratio is incredibly low—typically around 0.03%. For every $10,000 you invest, the fee amounts to only about $3 per year. That’s less than the cost of a single cup of coffee to have your slice of the 500 largest U.S. companies professionally managed.

This commitment to low costs is a key benefit of investing in VOO. Keeping fees down ensures more of your money stays invested, where it can grow and compound over time. It’s why VOO is consistently named one of the best low-cost S&P 500 funds.

VOO vs. SPY vs. IVV: Are Other S&P 500 ETFs Better?

While VOO is a fantastic choice, it isn’t the only one. You’ll often see two other major S&P 500 ETFs alongside it: SPY (the SPDR S&P 500 ETF) and IVV (the iShares CORE S&P 500 ETF). Think of them as other leading brands that follow the exact same S&P 500 “recipe.”

Because all three funds are built to do the same job, their performance is nearly identical. If you plotted their growth on a chart, the lines would look like they were drawn right on top of each other. No matter which of the three you pick, you are getting a basket that contains the same 500 companies.

For most long-term investors, the choice often comes down to that tiny expense ratio. Both VOO and IVV typically have a slightly lower annual fee than SPY, giving them a small cost advantage over decades. This makes VOO a favorite for many, but you’re making a great choice with any of them.

Your Simple 3-Step Plan to ‘Buy the S&P 500’

Ready to put your knowledge to work? Here’s a simple, three-step plan for investing in the S&P 500 through an ETF:

1. Open a brokerage account—an app or website like Vanguard, Fidelity, or Schwab.

2. Fund your account by transferring money from your bank.

3. Search for the ticker ‘VOO’ and place your first order.

The next time you hear someone say they “invest in the S&P 500,” you’ll know exactly what they mean. The market is no longer an abstract concept, but something you can own a piece of with a single purchase, turning financial confusion into confidence.