$57 Billion Just Rushed Into SPYM | Is SPY’s Cheaper Twin Finally Taking Over?

$57 Billion Just Rushed Into SPYM | Is SPY’s Cheaper Twin Finally Taking Over?

Omor Ibne Ehsan

Sat, August 29, 2026 at 7:10 PM GMT+3 6 min read

Quick Read

• Investors poured $57 billion into SPYM in 2026, favoring its 0.02% fee over SPY's 0.0945% for identical S&P 500 exposure.

• VOO and IVV match SPYM's fee advantage as core S&P 500 holdings, with brokerage access and commission-free trading typically deciding the choice.

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The flow numbers tell you what buy-and-hold investors have already decided. Investors poured roughly $56.75 billion into the State Street SPDR Portfolio S&P 500 ETF (NYSEARCA:SPYM) so far in 2026, including about $5.2 billion over the latest month, lifting the fund beyond $170.5 billion in assets.

That is a lot of money moving into a fund most investors had never heard of two years ago. SPYM owns the same S&P 500 that the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has tracked since 1993. What changed is the price tag and the plumbing. SPYM charges 0.02% against SPY's 0.0945%, and it is structured as an open-end fund rather than a unit investment trust. Those two differences are quietly reshaping which funds belong in a long-term portfolio and which belong on a trading desk.

Same Index, Two Very Different Jobs

Both funds track the S&P 500, and their top holdings are essentially identical. SPYM's largest position is NVIDIA (NASDAQ:NVDA) at 8%, while SPY also carries NVIDIA at 8%. The rest of the top ten matches in the same order.

Because the portfolios are the same, the fund-selection question stops being about exposure and starts being about cost, structure, and how you intend to use the thing.

SPY was launched as a unit investment trust, a legal structure that forbids the manager from reinvesting dividends internally or lending securities. Cash from dividends sits uninvested until the next quarterly distribution, which creates a small but persistent drag during rising markets.

SPYM is an open-end fund. It can reinvest dividends immediately and engage in securities lending, both of which quietly help tracking. Over a long holding period, those small edges compound alongside the lower fee.

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SPY's structure, though, is precisely what makes it the deepest, most liquid equity product on earth. Its options market has no rival, and its bid-ask spreads are pennies on hundreds of dollars. Traders pay the higher expense ratio because they need that liquidity.

What the Fee Gap Actually Buys You

The expense difference amounts to $74.50 per $100,000 invested per year. On a single-year basis, that is trivial. Over a thirty-year horizon on a growing balance, it is meaningful money that compounds against you if you sit in SPY out of habit.

The performance record over the past year reflects both the fee gap and reinvestment mechanics working in SPYM's favor. SPYM returned about 21% over the trailing year and 14% year to date, and its longer arcs read similarly: about 84% over five years and 318% over ten on a dividend-adjusted basis.

If two funds hold the same securities and one charges a fraction of the other's expense ratio, the cheaper one wins the compounding race unless something structural interferes. Nothing structural interferes here.

Vanguard's VOO and iShares' IVV occupy the same territory at comparable fees and are equally defensible core holdings. The choice among the three often comes down to which brokerage the investor uses and whether commission-free trading applies.

What the fee gap does not buy is any edge in a trading account. Nobody clips a basis point running in and out of an S&P 500 position on a Tuesday afternoon.

Why SPY Still Owns the Trading Desk

SPY still controls roughly $808.5 billion in assets, and that scale is the point. Its liquidity supports institutional hedging, index arbitrage, and an options chain used by everyone from pension funds to weekend covered-call writers.

A trader running short-dated options or building a delta-hedged position needs tight spreads and deep books at every strike. SPYM cannot match that ecosystem because liquidity begets liquidity.

The unit-investment-trust structure that hurts long-term holders barely registers on a position held for hours or days. Over a short window, uninvested dividend cash is a rounding error, and the ability to move size at a fair price matters far more.

SPY has become a specialized trading vehicle whose fee is really a liquidity toll. SPYM has become the low-friction way to own the same index over the long term.

The inflows confirm the migration. SPYM was named the default investment for the new Trump Accounts on July 1, which should generate durable contributions from millions of young accounts, though most of this year's $57 billion arrived before that program began.

Verdict for a Buy-and-Hold Investor

For a long-term holder, SPYM is the better choice. Same index, lower fee, cleaner structure, and identical dividend character with quarterly distributions and a trailing-twelve-month total of roughly $0.91 per share.

SPY earns its keep for anyone running options, hedges, or sizing in and out of the market on short notice. Holding it as a decade-long core position is a habit worth breaking, because the cost gap is real and the structural drag is not zero.

Use SPYM, VOO, or IVV as the core S&P 500 sleeve, and reach for SPY only when the trade specifically requires its liquidity or options market. Owning both for the same job is redundant.

The $57 billion moving into SPYM this year reflects a slow reallocation by investors who finally realized that paying more for the same portfolio was no longer necessary.

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If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.

Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)

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