You’ve decided to purchase an ETF that tracks the S&P 500 Growth Index.
However, there are quite a few different ETFs that track this index, such as SPYG and IVW.
So which one should you choose?
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The difference between SPYG and IVW
Both SPYG and IVW track the S&P 500 Growth Index. SPYG is managed by SSGA while IVW is managed by BlackRock. They mainly differ in their expense ratios and unit price.
Here is an in-depth comparison between these 2 ETFs:
Both SPYG and IVW track the S&P 500 Growth Index.
The S&P 500 Growth Index consists of large-capitalization U.S. equities that exhibit growth characteristicsBlackRock
There are 3 main factors which the S&P 500 Growth Index uses to measure these growth stocks include:
- Sales growth
- Ratio of earnings change to price
Compared to the S&P 500, the S&P 500 Growth Index only has 232 holdings!
Since both ETFs track the same index, they should roughly have the same performance.
You can see this from their stock price charts.
You can read my guide to find out what do the red and green bars mean in a stock chart.
Apart from very minor changes in price, they essentially give you the same performance!
The main difference in their performance will be due to tracking error. However, this should not make much of a difference, especially if you are investing for the long term!
They are managed by different fund managers
IVW was started in May 2000, which is 4 months earlier than SPYG (September 2000). Even with this small difference, IVW has a much larger assets under management (AUM)!
|AUM||10 billion||33 billion|
They are listed on the same exchange
Both SPYG and IVW are listed on the New York Stock Exchange (NYSE). As such, here are some things you’ll need to consider when trading on the NYSE:
Minimum units to invest
You are required to only invest a minimum of 1 unit for each ETF.
When you purchase an ETF through a broker, you will be charged a certain commission for each trade you make.
As such, you’ll need to find a broker that gives you the best deal for the amount you intend to invest in!
You can consider Tiger Brokers, which charges a minimum of 1.99 USD for each trade you make.
The unit price of each ETF is the price you’ll need to pay for 1 unit. Both SPYG and IVW have quite similar unit prices.
|Estimated Unit Prices||USD$50||USD$60|
If you have a smaller sum to invest, then SPYG might be better as it is slightly more flexible.
You should not worry about the difference in the unit price. This is because both ETFs are tracking the same index. As such, their performance will be very similar!
Dividend withholding taxes
Both SPYG and IVW are domiciled in the US.
2 layers of taxes
For any ETF, the fund manager buys the stocks based on the index they are tracking. The dividends that they distribute are collected from the stocks in their fund.
As such, there are 2 layers where you may incur some taxes:
- From stock to ETF
- From ETF to you, the investor
When the stock distributes its dividend to the ETF, no tax is incurred. This is because it is from a US stock to a US-domiciled ETF.
However when the dividends are distributed to you, they will incur the 30% tax. This is because you are a non-resident alien!
If you wish to track your dividends with the taxes accounted for, you can consider trying out StocksCafe’s platform.
Don’t forget to factor in the withholding tax when calculating the dividends you receive!
You can read my comparison between accumulating and distributing ETFs to see how they differ.
Another significant cost of investing in US-related assets is the estate tax. This can go from 18% all the way to 26%!
An estate tax is a tax on the right for you to transfer your assets after you have passed on.
The estate tax is really hefty if you are a non-resident alien of the US.
Since both ETFs are domiciled in the US, they will be included in your taxable estate.
If you wish to leave behind a legacy for your loved ones, you may want to reconsider investing in these ETFs!
On top of the trading commissions you’ll need to pay the broker, you will have to pay an expense ratio to the fund manager as well.
The expense ratio is charged by the fund manager to cover the costs of running the fund.
Based on the value of your assets in the fund, you will be charged an annual fee.
Here are the expense ratios for these 2 funds:
It is interesting that even though IVW has the larger assets under management, it is charging almost 4 times the expense ratio of SPYG!
You may think that IVW may be cheaper due to the larger economies of scale. However, this does not seem to be the case!
This difference may seem little, but it will affect you in the long run!
If you are looking to actively trade using these ETFs, you may want to look at their liquidity. One of the indicators you may want to look at is the ETF’s trading volume.
|Liquidity||1.8 million||1.8 million|
Both of these ETFs have very similar liquidity.
Since they are both frequently traded, you should be able to buy or sell either ETF at your intended price.
Here is the complete breakdown between SPYG and IVW:
|Index Tracked||S&P 500 Growth||S&P 500 Growth|
|AUM||10 billion||33 billion|
|Estimated Unit Prices||$50||$60|
|Dividend Withholding Tax||30%||30%|
|Average Trading Volume||1.8 million||1.8 million|
Both ETFs look really similar, so which one should you choose?
I am leaning more towards SPYG, due to these 2 reasons:
- Lower expense ratio
- Lower unit price
Because of this, I believe that SPYG is the more attractive ETF to invest in.
Both ETFs track the same index, so their performances should be very similar.
However, I believe that SPYG is the better option. The lower expense ratio will definitely improve your return in the long run!