Two Distinct Paths to S&P 500 Exposure: SPLG and SPY Compared

Understanding the Core Difference

When building a diversified portfolio anchored in U.S. large-cap stocks, most investors eventually encounter a choice between two dominant ETF options: SPDR Portfolio S&P 500 ETF (SPLG) and SPDR S&P 500 ETF Trust (SPY). While both track the S&P 500 Index and deliver nearly identical market performance, they serve fundamentally different investor behaviors.

The distinction isn’t about what you own—both hold virtually the same 500+ companies with matching sector allocations. Instead, it’s about how you own it: SPLG optimizes for long-term wealth accumulation through lower costs, while SPY prioritizes trading efficiency and market access through unmatched liquidity.

The Cost Advantage: SPLG’s Long-Term Edge

SPLG charges a 0.02% annual expense ratio compared to SPY’s 0.09%—a sevenfold difference that compounds significantly over decades. While the 0.07% gap may seem trivial annually, it represents permanent drag that reduces your market returns.

To illustrate: on a $100,000 investment, SPLG’s lower fee saves $70 per year compared to SPY. Over 30 years of 10% average annual returns, that seemingly small difference accumulates to thousands of dollars in forgone gains—wealth that remains in your account instead of paying fund operators.

Both funds deliver identical 1-year returns (14.27% for SPLG vs 14.18% for SPY as of December 2025) and matching dividend yields of 1.1%, confirming they capture the same market movements. The expense ratio gap simply reflects their different operational philosophies.

Scale and Liquidity: SPY’s Unmatched Market Position

SPY commands vastly greater assets under management, with $695.8 billion compared to SPLG’s $95.7 billion. This size advantage translates directly into trading convenience.

SPY, launched in 1993, remains the most actively traded ETF in U.S. markets. Its enormous daily volume means you can buy or sell large positions without meaningfully moving the price—critical for institutional investors, frequent traders, or anyone timing market entries and exits. During market volatility, when spreads widen and execution precision matters, SPY’s liquidity provides a steady hand.

SPLG, while still liquid, attracts far fewer daily traders. For buy-and-hold investors with modest annual rebalancing needs, this distinction barely registers. For active traders or those managing significant capital flows, SPY’s dominance becomes relevant.

Portfolio Construction: Nearly Identical Holdings

Both funds hold 503-504 companies with virtually interchangeable sector tilts:

Top sector allocations:

• Technology: SPLG at 36%, SPY at 35%
• Financial Services: both at 13%
• Consumer Cyclical: SPLG at 11%, SPY’s third sector similar

Largest stock positions: The portfolios overlap substantially. Nvidia leads both funds (8.34% in SPLG, 7.25% in SPY), followed by Microsoft (6.85% vs 6.16%) and Apple (6.79% vs 7.02%). These minor weighting differences reflect each fund’s slightly different rebalancing methodology, but the practical impact on returns is negligible.

Five-Year Performance Alignment

Both funds converted $1,000 into $1,826 over five years (approximately 11.8% annualized), with a beta of 1.00 for each. This identical growth trajectory confirms that fee differences haven’t yet translated into noticeably divergent returns—SPLG’s advantage will become more apparent across 20+ year horizons.

Which Path Fits Your Investing Style?

Choose SPLG if you prioritize:

• Long-term buy-and-hold investing with minimal trading activity
• Maximizing every basis point of return through lower fees
• Simplicity with reduced ongoing costs
• Time doing more of the investment work than active decision-making

Choose SPY if you prioritize:

• Frequent rebalancing or tactical trading adjustments
• Precision execution when market timing matters
• Maximum trading flexibility and minimal bid-ask spreads
• Acting quickly without worrying about liquidity constraints

The Deeper Insight

Neither fund outperforms the other on index-tracking ability—both successfully mirror S&P 500 performance. The real choice reflects your investing temperament: SPLG rewards patience through accumulated savings, while SPY accommodates action through superior execution tools.

For most individual investors building retirement portfolios, SPLG’s cost advantage ultimately matters more than SPY’s liquidity premium. For active traders or those managing large institutional flows, SPY’s trading dominance justifies the higher fee.

The S&P 500 itself remains the engine of wealth creation. The two ways to access it simply reflect different philosophies about what matters most over your investment journey.

Key Terms Explained

Expense ratio: The annual percentage fee charged to cover a fund’s operating costs.

ETF: An investment fund holding a basket of securities (stocks, bonds) that trades like a stock on exchanges.

Assets under management (AUM): Total market value of all investor assets the fund manages.

Liquidity: The speed and ease of buying or selling without significantly affecting price.

Dividend yield: Annual dividends expressed as a percentage of the fund’s current price.

Beta: Price volatility measurement relative to the broader market; 1.0 equals market movement.

Sector weights: Percentage of fund assets allocated to different industry categories.

Large-cap: Companies with market capitalization typically exceeding $10 billion.

Trading volume: Total shares traded during a specific time period.

Total return: Price appreciation plus reinvested dividends over a period.