Following a rocky April opening, thanks largely to aggressive U.S. tariff policy and economic jitters, the S&P 500 has been on a surprising tear, recording its longest string of gains since 2004.

Along for the ride are two of the most recognizable index-tracking ETFs: Vanguard S&P 500 ETF VOO and State Street’s SPDR S&P 500 ETF Trust SPY. Though they might look very similar on the surface, recent history has highlighted some distinct differences between the two funds — differences that could be influencing investor behavior in more than one way.

Neck And Neck, Temporarily

VOO and SPY each picked up about 3% during the past week, fueled by healthy tech earnings, robust labor market reports, and a collective exhalation of relief regarding waning trade tensions. But the path to those gains was far from smooth. Trump’s tariff rollercoaster created historic daily volatility, with the Cboe Volatility Index reaching levels not seen since 2020, in April. And in the midst of the chaos, VOO came out with more than profits, it made investor dollars at a record-breaking rate.

Fund Flows

In a month of wild market fluctuations, VOO recorded almost $21 billion in inflows, according to data by Bloomberg, its largest monthly total ever. This takes us back to February, when VOO’s growing popularity propelled it past SPY in terms of total assets. For the year to date, VOO has attracted $55 billion, while SPY has seen a net outflow of $27 billion. In blunt terms: investors appear to be voting with their wallets, and Vanguard is winning the popularity contest.

SPY, after a $2.2 billion inflow during April, is on course to record its worst year of flows since 2015, according to Bloomberg. Many find the slightly higher expense ratio of 0.095% over VOO’s very low 0.03% difficult to accept, particularly at times of turmoil.

Cost & Liquidity: Pay More, Trade More

SPY’s primary strength continues to be its liquidity. With more than 77 million in average daily volume, it’s the most actively traded ETF in America, making it perfect for short-term traders. VOO, though still extremely liquid, averages closer to 8.6 million per day with slightly broader bid-ask spreads.

Structure & Efficiency

This is where the divergence becomes more distinct. SPY, the old master of ETFs, is a Unit Investment Trust (UIT). That constrains it from reinvesting dividends or lending out securities, both of which might otherwise boost returns. VOO, being an open-end fund, does both. It reinvests dividends until distributed quarterly and lends out securities to generate additional income, bolstering its aggregate return potential.

Tax efficiency also works in VOO’s favor. Its in-kind creation/redemption feature serves to keep capital gains distributions to a bare minimum, an advantage that SPY, owing to its UIT structure, cannot emulate so well.

The Retail Wave

While SPY continues to lead in gross trading volume, VOO is slowly gaining mindshare among individual investors. Indeed, on sites such as Interactive Brokers, VOO frequently topped the most-traded list last month, which indicates that longer-term investors are moving toward its low-cost, tax-efficient model, Bloomberg reported.

VOO and SPY both offer exposure to the same S&P 500 giants Apple Inc AAPL, Microsoft Corp MSFT, and NVIDIA Corp NVDA, but they cater to different investor appetites. SPY is for the high-frequency trader who values lightning-fast execution. VOO is for the buy-and-hold investor who prefers to let compounding and low fees do the heavy lifting.

In this story of two tickers, SPY might still reign supreme in the trading pits, but VOO is quietly and quickly redefining what a heavyweight in the ETF space means.