Podcast Episode - Suze School: VOO or SPY, Which ETF is Best for You?

Suze gives a quick recap of what’s happening with the Must Have Documents and the latest news regarding interest rates.  Then, we go to Suze School for a lesson in the difference between the VOO and SPY ETFs and which one may be the right one for your needs. 

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Podcast Transcript:

June 2nd 2024. Welcome everybody to the Women and Money podcast as well as Everybody Smart Enough to Listen, Suze O here and today is Suze School. But before we go into Suze School, a few announcements that I want to make.

Obviously, you probably have heard that June 5th is my birthday.

So that also seems to be however an important date for all of you when it comes to Alliant Credit Union. And let me tell you why for the 18 month certificate of deposit at Alliant Credit Union, the interest rate is going to go down from 4.9% 4.95% for $75,000 or more down to 4.8% and 4.85% for amounts of $75,000 or more. So, you need to know that.

Now if it were me, I would be looking at the 12 month, which is good all the way from 12 months, 13 months, 14 months and so on up to 17 months and 30 days.

And for there, you can still get 5.15% or 5.20% for amounts of $75,000 or more. So, if you are tempted to get an 18 month certificate of deposit, I don't know, I would get the 17 month and 30 day one at Alliant Credit Union. You would go to my alliant.com again. They only advertise the 12 month, the 18 month and those, but you call and you can get the 17 month if you so choose

Next, the Suze quiz. You have two days left till June 4th to go to my alliant.com and do what? Take the Suze quiz. All you have to do is answer five questions. Doesn't matter whether you get them right, you get them wrong. But after you've answered all five, you get to put in your email and somebody on my birthday, their email will be chosen and one of you will win $5,000. 

Now, I don't know if you haven't done that yet or not. I don't know if you haven't told all of your friends about it or not. I don't know if you haven't gone out on the streets and shouted it to everybody or not. But you should because there are no strings attached here. Everybody. It's my birthday. It's $5,000. And what have I been doing with you all these years on some level. I've been paying you to save or Alliant Credit Union has been paying you to save. I've been trying to get you involved with your money and I don't know, I don't think there's a better way to get involved with money than a free $5,000. Simply to see. Are you being smart with your money or are you not when you take the quiz? All right. That's number two again - go to my alliant.com.

Number three and I'm really excited to announce this for a while. Now, you haven't been hearing me speak about what I call the must have documents and the must have documents happen to be a will a revocable trust, an advance directive and durable power of attorney for health care as well as a power of attorney for finances. And those are documents that I call the must have documents because in my opinion, you must have them and I used to talk about them all the time and all the time. You would see them everywhere.

But then Hay House, who is the actual manufacturer of those documents, decided it was time to totally update them, do everything new on them, have new lawyers, everything, re-evaluate them the whole thing and that took, believe it or not approximately, I wanna say eight months or longer that process now has been totally completed.

So now, Hay House, once again, is offering them for sale, just simply go to MustHaveDocs.com and that's where you can purchase them currently. They are being offered for $99 and eventually that will go to $199 because of all the work that went into them. For those of you who have already purchased the must have docs. Hey, you're happy you don't want to change anything. You don't have to your documents. I'm sure if you've done them correctly are valid just like they are.

However, whenever you purchase the must have docs, you also get the right when there is an update to get that update for absolutely free. So if you want, why not just go to your docs, push update, update it, look at everything again. And so what if you have to notarize it and do everything again like that? It's not that big of a deal. Your information will automatically transfer for you. And just so you know that you have the latest and the greatest, but totally up to you.

Now, the other thing I just want you to know about these must have documents is that unlike other programs that you are probably seeing advertised all the time on TV, usually you're seeing it for just one doc like a will or whatever it may be. No place else. Are you going to get all of the must have documents? Not only are you going to have the ability to update those must have documents as much as you want, change them as your situation changes for no more money, share them with your family members for no more money, but really have them be the state of the art documents for you. So up to you, but that's just something that's there that is $2,500 worth of state of the art documents that once again, Hay House is making available to all of you by just simply going to must have docs dot com.

All right. Now, what else do I want to talk to you about? All right. On the women and money community app, you can see many of the pictures from our safari that we went on a week or so ago and you might want to take advantage of that.

And if you want to ask a question that KT and I hopefully will be answering on the Ask Suze and KT Anything edition of this podcast, go to Ask Suze podcast at gmail.com and that is where you send them in. I mean, I guess that's enough for all of this podcast. I just use up all the time.

I have not now, two things I want to talk to you about and it's about Suze School. So take out your notebooks just a day or two ago, the new inflation data came out and everything and what was expected, what was not. And here's the bottom line without going into a whole lot of numbers like who even cares, nothing is moving when it comes to inflation, maybe it's going up a little, but it's definitely not really coming down. So I think in the long run, what you probably are going to see is not a whole lot of movement with the fed funds rate.

And you should just know that I do think in the long run, what we will probably see is that the feds are going to have to come off of their 2% inflation target and probably settle for something around 2.4% or so before they start moving the fed funds rate. But eventually interest rates have to start coming down. They just do so. Therefore, we'll see how long that takes. But until there is evidence that it's probable that the feds are going to start to lower interest rate.

You're still ok. Going short term with treasuries or shorter term certificates of deposits or whatever it is that you may want or leaving the money in a money market account. Remember, we were expecting close to four, five or six fed funds cut this year. We haven't gotten any and chances are we may not get any this entire year.

So we are where we are. However, a lot of you are writing me and you're saying, Suze, should I be buying 20 year bonds? Should I be buying 30 year bonds? What should I be doing? You might want to be doing a little bit of everything. There is no way for me to know when something could happen when something could change the trajectory of interest rates.

So therefore you do a little bit of it all, everyone. So stop Sam, especially you, you keep writing me and you're driving me crazy. I just want to tell you right? Is that not really but kind of Sam... There's no way for anybody to know given what's going on in the economy and everything that, yeah, stop buying short term now and just buy long term treasuries. No, don't buy long term just by short term. Nobody knows.

So just do a little bit of it all and eventually you're gonna hit it right one way or the other. I personally thought that interest rates would already have started to come down, which is why I was purchasing 30 year treasury bonds. I'm not upset that I purchased them.

I don't care that our interest rates going up or down. I'm very happy with the interest rate. I locked in. I'm not worried about it. I plan to keep them long term or we'll see when interest rates do come down, what I'll do with them, but stop driving yourselves crazy.

All right. There's one question that a lot of you seem to be asking me over and over again. And the question is, when are you and Keith Fitzgerald going to come out with an investment program to take care of all of our needs so that we know what to do. The answer to that question is I'm not exactly sure because when Keith and it will be Keith's program, because Keith is the expert on that. And I hope a lot of you listen to his Five with Fitz. They're absolutely free. And it's a nice little guide and obviously he refers everybody you want to know more by his one bar ahead newsletter, which I think is $1,500 a year. So that may be too expensive for you and whatever it may be.

But the Five with Fitz is free. And I think it's educational, but when Keith comes out with the program, he's got to test it, retest it, do the math on it have to figure out what is it that all of you want? What is it that all of you need?

And it can't be something like, oh, you have $3 million to invest. So this is what you need to do. It's gotta be something that's kind of generic for everybody no matter what amount of money you are going to be investing. So you have to be patient number one and see if that even happens because Keith has to know without a shadow of a doubt that it's gonna work and it's gonna work great.

But you can't wait until that happens because if you're just waiting and you're possibly missing a whole lot of opportunities, so therefore, a lot of you are saying, what should I do? I don't know what to do. I need to know. And a lot of times when you don't know what to do, then you do what the majority of people are doing. Even Warren Buffett came out a little while ago and said, hey, an exchange traded fund buying the entire index, he doesn't have a problem with that whatsoever.

Now, there are people who have problems with that.

But if you're just wanting to get involved with the overall markets right now and you don't want a whole lot of different things that you don't understand. Start there, the big question becomes many of you are confused between an ETF by the symbol VOO.

VOO which is the Vanguard Standard and Poor's 500 index ETF versus the SPY, which is the symbol for the Spider S and P 500 unit investment trust. It's an ETF trust. All right.

And you keep saying Suze, which one is better if I'm going to invest in one or the other, which one should I invest in? Can you just tell me the difference between those two?

So for those of you, there is an index called the Standard and Poor's 500 index which is basically almost the entire stock market. 500 of the largest companies, good companies, dividend, paying companies, all kinds of things. So a lot of people feel if they just were to buy into that index, then they would be ok and they don't have to worry about it. So that's probably true for the majority of you.

However, then you take it a step further and go, what is the difference between VOO and SPY? And is there a difference at all? And the truth of the matter is if I had to choose between one or the other, I would choose the Vanguard Standard and Poor's 500 index ETF over the Spider S and P 500 ETF trust.

Did it just shock all of you? Now remember for years, I've been telling you, I still like the Vanguard total stock market index ETF the VTIS that invested even more. But your question to me has been between those two VOO and Spider. Which one do I favor and why?

All right. So you better get out like I said a little bit ago, your Suze notebooks because this is going to be quite the Suze school.

First of all, VOO has a lower expense ratio than the Spider SPY. The VOO expense ratio is only 0.03% and the expense ratio for SPY is 0.09% not a big difference, but enough of a difference to matter.

Now VOO was originated in 2010. The Spider was introduced in 1993 and we'll get to that in one second. But if you go back and compare the actual return for the VOO from 2010 to 2023 you would have averaged 13.91% on your money. The spider, you would have averaged 13.87%. Not a big difference, but still a difference. Now, what accounts for that difference? All right. Are you ready for this?

When the spider? The spy was originally created again, January of 1993 ETFs did not exist back then. Nobody even had a clue what they were.

So when they first came out and they were the very first ones to create an investment vehicle that followed an index, it was what was called a unit investment trust, which is why when you look at the full name of the spider, it's the Spider SPDR S & P 500 ETF trust and the difference between a trust and a regular exchange traded fund that Vanguard created in 2010 with the VOO Standard and Poor's 500 ETF is that there are differences in what each one of them can and cannot do.

For instance, VOO can automatically reinvest dividends. So if you happen to buy a share of the VOO ETF, even if you do not tell them that you want your dividends reinvested, they automatically reinvest the dividends in the spider, the SPY, they are not allowed to automatically reinvest dividends. So unless you have instructed them that you want to be part of the dividend reinvestment program, then they distribute the dividends to you in cash.

So if you happen to own the spiders, the SPY and you want your dividends reinvested, you have to let them know and tell them because they cannot by law automatically reinvest dividends while the VOO ETF absolutely can. Now, whether you know it or not, that is a big difference because when stocks or ETFs are going up and you're reinvesting dividends, you're actually getting a little bit higher of a return.

Now, if you were to look over the past 10 years, the truth of the matter is VOO typically has provided a slightly higher dividend yield than the spiders did not by a lot, you know, in 2022 for instance, VOO paid a dividend of 1.50% while the spider paid a dividend of 1.47%.

But over the past 10 years or so, VOO has been far more tax efficient than a spider. Now, I could go on and on about the difference between the two. Obviously, the spider is one of the most largely traded ETF trusts that are out there bar none.

So because it's so large, when it trades, it trades at smaller increments than the VOO. So if you happen to be a trader and where you buy, you sell, you buy and sell the spiders, then a spider may be better for you. If you are a long term investor, then the voo would be better for you.

So that is a very simplisticexplanation between the two and again, for the majority of you, if you can't make up your mind because the differences are so different, I can't tell you. But every penny counts and therefore you want to count every penny in the long run for the majority of you voo, the symbol for the Vanguard Standard and Poor's 500 ETF in the long run would be better for you if history continues to repeat itself. So, how is that for a Suze school? All right.

I have to scoot. I'm gonna end this just a little bit early because KT and I are on the way again to the plane to go back to the island. They had one plane this morning that we could jump on and go back there.

And I'm telling you we're happy and anxious to go back. So I'm gonna end this and I'm just gonna say I'm happy to be back. I hope you found this interesting today. And there's really only one thing that I want you to remember when it comes to your money and it is this people first, then money, then things and if you do that and stay safe, you will be unstoppable.