Washington Wants to Auto-Open a Trump Account for All 73 Million Kids. Every One Defaults Into the Same Fund

David Beren

Tue, August 25, 2026 at 5:39 PM GMT+3 5 min read

Quick Read

VOO is the assumed default for 73 million Trump Accounts, but SPYM's 0.02% fee undercuts VOO's 0.03% for an essentially identical fund.
A 1 basis point fee gap yields roughly $9 extra per account over 18 years, but scaled across 73 million accounts the aggregate savings become material.
Switching from VOO to SPYM inside a Trump Account triggers no capital gains tax and requires only a ticker change at the custodian.
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The Trump Account proposal would auto-open a tax-advantaged brokerage account for every child in America, and Washington is reportedly steering all ~73 million of those default accounts into a single S&P 500 index fund with a fee cap of 0.10%. The politically obvious pick is Vanguard S&P 500 ETF (NYSEARCA:VOO), the retail investor's household name for cheap large-cap exposure. VOO owns the same 500 companies as every other S&P tracker, charges next to nothing, and has become the default answer whenever someone asks where to park long-horizon money. If the government picks VOO, the choice is uncontroversial. A cheaper, functionally identical option is also available.

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Why VOO Is the Assumed Default

The appeal here is not complicated at all. Vanguard's reputation in index funds is arguably the strongest brand in all of passive investing, and this fund's 0.03% expense ratio lands well inside the proposed 0.10% statutory cap. Performance has done exactly what an S&P 500 tracker should do, coming in at 21.87% over the past year, 85.29% over five years, and a remarkable 313.01% over ten. For a program that already has 7 million signups and $1.5 billion deposited, this fund is the safe political choice given its deep brand recognition among retail investors.

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Where the Cheapest-Sounding Fund Isn't the Cheapest

That fee advantage holds up against most of the industry, though one competitor does manage to undercut it. SPDR Portfolio S&P 500 ETF (NYSEARCA:SPYM) charges 0.02%, one basis point less. Both funds hold the same index in roughly the same weights, with top positions in NVIDIA at 7.57%, Apple at 6.66%, and Microsoft at 4.91%. Same 500 stocks, same sector mix, one-third lower fee. On a fund meant to sit untouched inside a minor's account for 18 years, the fee gap is small in any given year and quietly meaningful across the horizon.

What One Basis Point Actually Buys

A 1 basis point gap on a $1,000 initial deposit compounds to roughly $9 of extra terminal value across 18 years at a 10% assumed gross return. That is modest. Scaled across 73 million accounts and the recurring contributions Congress envisions, the aggregate savings become material for households collectively, even if any single child's account sees a small dollar difference. SPYM's near-identical performance record supports the case that the fee gap flows through cleanly rather than being eaten by tracking error. Over the past ten years, SPYM returned 314.09%, VOO returned 313.01%, and iShares Core S&P 500 ETF (NYSEARCA:IVV) returned 312.60%. The ranking mirrors the fee ranking.

Where IVV Fits

BlackRock's fund is the natural third option and, for a federal program that values scale and operational depth, arguably the most pragmatic choice. It charges a 0.03% expense ratio, which matches its Vanguard rival, and it runs on infrastructure that is already used across most large 401(k) platforms. Its trailing 12-month distribution comes to $8.18751 per share, compared with the other fund's $7.3456, though those per-share numbers reflect different share prices rather than any meaningful difference in yield. This fund does not offer any fee advantage over Vanguard, just the benefit of issuer diversification.

Tradeoffs Worth Naming

All three funds hold the same index, so a switch changes almost nothing about the child's underlying exposure. The tax treatment inside a Trump Account is identical across funds. What changes is issuer concentration risk, which is real at the program level even if invisible to any one family, and a 1 basis point annual fee. SPYM's assets are smaller than IVV's or VOO's, which matters for a federal default fund that could receive tens of billions in new inflows: operational readiness is worth confirming before any pick becomes statutory.

How to Think About the Swap

For a household already contributing to a Trump Account defaulted into VOO, moving the balance to SPYM inside the same tax-advantaged account carries no capital gains consequences and requires only a ticker change at the custodian. Outside the program, in a taxable brokerage account, selling VOO to buy SPYM would realize gains and almost certainly cost more than a 1 basis point fee savings could recover for years.

What This Means for the Default

On a lowest-cost basis over an 18-year hold, SPYM ranks first among the three S&P 500 ETFs reviewed. VOO is a defensible choice, though SPYM is cheaper. If the default gets locked in by statute, the case for SPYM is that its 1 basis point edge is the largest verifiable, structural improvement available without changing what the account actually owns.