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From Wikipedia:

Exchange-traded funds (ETFs) that replicate the performance of the index are issued by The Vanguard Group (NYSE Arca: VOO), iShares (NYSE Arca: IVV), and State Street Corporation (NYSE Arca: SPY).

If I look up the quote for each ETF, I get these prices:

  • VOO at $210.74
  • IVV at $231.16
  • SPY at $228.80

Why aren't prices closer to each other, if they all replicate the S&P 500 index? Is it because each ETF comes packaged with various non-S&P 500 stocks inside?

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The ETFs are designed to replicate the return. Don't get hung up on the price.

Illustrative Example:

Say you have two ETFs both designed to replicate the return of an index. Call these ETFs A and B. Whether you buy 1 share of ETF A for $100 or 2 shares of ETF B for $50, you have invested $100.

Each ETF manager will take your money along with the money of others who have bought the ETF and go out and buy the stocks in the index in the correct weights. Now, this isn't exactly the way it works but for our purposes let's assume so because if we get into the finer details of ETF creation it will just be confusing.

So let's assume you were the only investor in either ETF and the market went up 1% the next day.
- ETF manager A bought $100 worth of the index and so made $1 and the 1 share of ETF A that you bought is now worth $101.
- ETF manager B bought $100 worth of the index and so made $1 and now your two shares of ETF B are each worth $50.50, for a total of $101.

Addendum*: Differences such as expense ratios, inception date, inception price, and to a far lesser extent where divs are parked until distributed can all lead to price differences, holding all other behavior constant.

*Some people seem to have an inability to read the comments. If I was going to post an answer to a question, I'd read the comments first. In fact, I do.

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    Those three are all trying their best to replicate the return of the index. They may have some little thing here or there for cash mgmt reasons or some such but they don't do things like [buy a little more of XYZ because we think it's going to go up]. Mar 22 '20 at 20:50
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    I agree that ETF prices are all relative but fund managers seem to have set the initial price based on the S&P 500. So to me there is a deeper question of why did they diverge? Is it due to expense ratio, slightly different portfolios, or something else?
    – Craig W
    Mar 22 '20 at 21:17
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    @CraigW They all started trading on the same exact date at the same exact initial price? Mar 22 '20 at 21:40
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    could also be different reinvestment of divs. Mar 22 '20 at 21:43
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    @RWP Huh. IVV and SPY seem to have started out at a price 10% of the S&P 500, but for some reason VOO started trading around 104 when the S&P 500 was about 1140.
    – Craig W
    Mar 22 '20 at 23:55
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The unit is arbitrary. It doesn't mean anything.

I buy these special paint can liners. Some stores sell 4 for $4.00, others sell 5 for $5.00 and others sell 6 for $6.00. It's exactly the same thing as that.

In any of the funds, your $1.00 buys, say, 0.0000316 shares of GE stock, as well as 499 other stocks in principle totaling up to $1.00 value. Just like all the stores make me pay $1 per liner.

It's just that some funds make you buy this $210.74 at a time, and others make you buy this at $231.16 at a time. Some stores make me buy liners 6 at a time.

This arbitrary value probably came about from the fund's inception, when they said "Let's define our fund so that each share is worth $100 today" (based on the S&P price today).

And the next fund did exactly the same thing, but on a different day.

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