The State Street SPDR S&P 500 Trust ETF (SPY) is one of the largest ETFs and is a core holding of many portfolios, while the State Street SPDR S&P 500 Growth ETF (SPYG) is a popular “factor” ETF. In this context, factors are quantitative characteristics that index providers assign to stocks. In this case, SPYG targets growth stocks (as they are defined by the index provider). Even though SPY and SPYG play different roles in a portfolio, many investors compare the SPYG vs SPY in order to determine whether they should tilt their portfolio towards a factor or to benchmark a factor’s performance.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
SPYG essentially owns the subset of SPY’s holdings that are considered growth stocks. SPY owns a more diverse portfolio including growth stocks. SPYG has outperformed in the past, but future performance will depend on how the growth factor performs moving forward.
The Long Answer
Historical Performance: SPYG vs SPY
SPY was the first ETF (launched in 1993), while SPYG was launched later in 2000. Since then, SPYG has performed better by about 1.7% per year. This has compounded over time though and the cumulative performance differential is about 140%!
As the SPYG vs SPY chart shows, the growth factor has really outperformed the broader market since their common inception. It is anyone’s guess whether growth or value will perform better in the future.
Differences Between SPYG and SPY
The primary difference between these two funds is that SPYG tracks a growth-oriented index, while SPY tracks a broader index.
Geographic Exposure
Both SPYG and SPY hold essentially 100% US stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical country exposures.
Market Cap Exposure
Overall, the market cap exposures of SPYG and SPY are relatively similar as both are large-cap funds.
Sector Weights
There are some significant differences in sector weights, which makes sense based on the fact that SPYG is targeting the growth factor and some sectors meet the growth factor criteria more easily.
| SPYG | SPY | |
| Basic Materials | 1.93% | 2.22% |
| Consumer Cyclical | 9.79% | 10.47% |
| Financial Services | 6.45% | 12.05% |
| Real Estate | 0.88% | 2.51% |
| Communication Services | 7.84% | 8.89% |
| Energy | 6.56% | 4.24% |
| Industrials | 4.72% | 7.67% |
| Technology | 36.95% | 28.94% |
| Consumer Defensive | 6.67% | 6.68% |
| Health Care | 17.74% | 13.68% |
| Utilities | 0.47% | 2.67% |
Expenses
SPYG’s expense ratio is .04%, while SPY’s expense ratio is .0945%. Yes, SPY is 2x+ more expensive than SPYG, but we’re talking about 5 basis points! This in an non-issue in my opinion.
Transaction Costs
ETFs are free to trade at many brokers and custodians, so both SPYG and SPY should be free to trade in most cases. Additionally, these funds are among the largest ETFs and are very liquid. The bid-ask spread of both SPYG and SPY is very low, so individual investor trades will not generally be large enough to “move” the market.
Tax Efficiency & Capital Gain Distributions
ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.
Alternative Vehicles
Investors limited to mutual funds should have no problem finding a mutual fund version of SPY or a mutual fund version of SPYG.
Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate SPY or SPYG easily.
Final Thoughts: SPYG vs SPY
Both funds are great ETFs that do what they are designed to do. Generally speaking, I do not think factor ETFs should be the core of a portfolio. For a core position, I would personally choose SPY every time. However, investors looking for a satellite position in order to tilt their portfolio towards growth could do a lot worse than using SPYG. At the end of the day, these two funds are not necessarily comparable because they play very different roles in a portfolio.
Further Reading
Readers interested in learning about similar funds from another sponsor want want to read up on Vanguard VOO vs VUG.
