I saw something very interesting when I was researching ETF fund flows at XTF.com.
It's pretty clear that money is flowing out of large-cap stocks, so I wasn't surprised to see that over the course of the year so far, money has been flowing out of the SPDR S&P 500 ETF (NYSEARCA:SPY).
But money has actually been flowing into the Vanguard S&P 500 ETF (NYSEARCA:VOO).
Why? Probably because investors are getting smart. While SPY has a net expense ratio of 9.45 basis points, the Vanguard version only costs 5 basis points. That's an 47% discount - and the funds both track the exact same S&P 500 index.
Here's a look at the fund flows per XTF.com
While SPY has seen $5 billion dollars in net outflow year to date, investors put $1.79 billion into VOO.
At about $4 billion, Vanguard's VOO is much smaller than the $93.4 billion SPY ETF, so if you look at this in percentage terms to net asset value, you can see that VOO seems to be growing its assets relatively rapidly.
For short-term traders, a few basis points per year isn't going to make much of a difference. But if you're investing for the long term, those few basis points can add up over many years. Vanguard's VOO may be a less liquid than SPY, but volume is growing. And if you're a long-term investor, who cares?
Over a decade or two, VOO's advantage may only amount to a few hundred dollars, but it's your money. Why give it to an ETF?
So this one seems like a no brainer. Follow the fund flows. Take a look at VOO as a viable and less expensive alternative to SPY.