SPY's 0.09% Fee Could Cost Investors Thousands Compared to a Cheaper Alternative

SPY is one of the most liquid and widely traded ETFs in the world, yet its 0.0945% annual expense ratio is relatively high by passive investing standards. State Street, the manager of SPY, also offers SPLG, which tracks the same S&P 500 index at a fee of around 0.02% — several times cheaper. On a $100,000 investment over 20 years, the compounding difference in costs can add up to several thousand or even tens of thousands of dollars depending on market returns. The main reason investors still favor SPY is its unmatched liquidity and popularity among traders who need the tightest bid-ask spreads. For a long-term passive investor who is not actively trading, SPLG or similarly cheap funds from Vanguard and iShares represent a more cost-efficient choice. This example clearly illustrates how even a small fee difference can critically affect long-term investment outcomes.