Do you need to add more investment products to your portfolio? But how can you be sure which one to add? In this article, we will go through QQQ vs. VOOG that may help your strategy.
Getting the best available investment product is important as you grow your personal finance towards financial independence. We will discuss the key details between these two to assess if these can help your overall plans and goals.
Exchange-Traded Funds, commonly known as ETFs, enable investors to diversify their portfolios. Like the mutual funds, there are dozens or even hundreds of securities held in ETFs, allowing investors to buy shares in one ETF and get exposure to different investments.
Two of the most popular ETFs that track indices in the major markets are Vanguard S&P 500 Growth ETF (VOOG) and Invesco QQQ Trust (QQQ). Both of these funds trade in the US market. QQQ was launched on the 3rd of October 1999, while VOOG made its debut on the 9th of July 2010.
While these two funds have some similarities, they also have their differences, making them suitable for different roles in a portfolio. The choice between the two depends on your investment goal and what you intend to accomplish. Let’s look at their costs, performances, compositions, and other metrics to help you under which is suited for you.
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QQQ: Invesco QQQ Trust Series 1
QQQ or Invesco QQQ Trust Series 1 is among the most stable and actively-traded ETFs in the world. Commonly referred to as Triple Q, it has the structure of a unit investment trust.
According to the index rules, it only invests in Nasdaq stocks that are non-financial. In other words, it ignores all the other indexes. This makes it to be massively skewed against the large-capitalization portfolios.
Therefore, Invesco ETF tracks the Nasdaq-100 Index and aims to produce results like the yield and price of the Nasdaq-100 index. It consists of the 100 biggest non-fiscal entities listed on the Nasdaq, depending on their market capitalization.
During its lifespan, QQQ has proven to perform better and more consistently than the S&P 500 index. While its exposure to the tech sector is huge, it’s not a technology fund. Instead, its weighting makes it different from the vanilla large-capitalization funds or the pure-play coverage of the tech sector.
All in all, its underlying index, the Nasdaq-100, is highly recognized. QQQ produces an unconventional but reputed blend of technology, growth, and large-cap exposure. The fund and its index get rebalanced every quarter.
VOOG: Vanguard S&P 500 Growth Index Fund ETF
The goal of VOOG or Vanguard S&P 500 Growth Index Fund ETF is to measure the performance of its benchmark index that tracks the performance of the large-capitalization growth stocks in the US.
The fund uses a passive management style or indexing method that measures the performance of the S&P 500 Growth Index. The fund’s underlying index is considered the gauge of the overall performance of the US growth stocks.
The fund provides a high potential for investment growth. The value of its shares increases and decreases sharply compared to that of the fund that holds the bond. This makes it a great choice for long-term investors whose goal is to see their money grow.
QQQ Vs. VOOG: Key Similarities
Both QQQ and VOOG are considered to be US Stocks Large Growth Funds. This means they may be investing in the same portfolios, though not openly. Since both of them are high-quality funds, they have many similarities.
One of these is that they have assets worth over $100 billion. Their expense ratio is also relatively low. The holdings of the two funds overlap in many ways and have about 5 companies in their top 10 biggest holdings. The two funds are also highly liquid and have an average spread of 0.01%.
Other similarities between the two are:
- Both are ETFs
- They have an almost similar performance over the long-term
- They focus on the growth companies
QQQ Vs. VOOG: Key Differences
While they have many similarities, they also have differences. One of these is in the company that offers the ETF. QQQ is a product of Invesco, while VOOG is a Vanguard product.
VOOG focuses on growth companies. It has a price-earning ratio that is 34.2 times higher than QQQ. This is because it’s a growth index.
Other differences between the two are as follows:
|Number of holdings||102||304|
|Top 10 holdings||56.16%||52.52%|
QQQ Vs. VOOG: Composition Differences
Investors are commonly using index ETFs to build a diversified portfolio fast and inexpensively. However, most of these ETFs are less diversified and usually riskier than many investors assume.
Many of their underlying assets are in the hot mega-cap stocks such as Facebook, Apple, Amazon, Microsoft, and Alphabet.
If the value of one of these holdings drops, this will have a big impact on the overall performance of the ETF.
Both QQQ and VOOG have a large concentration of these portfolios. QQQ has 102 holdings, while VOOG has a total of 304 holdings.
QQQ holdings by sectors are as follows:
- IT: 60.87%
- Consumer Cyclicals: 17.66%
- Consumer Goods: 8.37%
- Healthcare: 5.69%
- Industrials: 5.21%
- Telecommunications: 0.96%
- Utilities: 0.92%
- Non Classified Equity: 0.42%
- Basic Materials: 0.25%
VOOG weightings by sectors are as follows:
- IT: 50.73%
- Consumer Cyclicals: 14.78%
- Healthcare: 9.77%
- Industrials: 8.29%
- Consumer Goods: 8.02%
- Financials: 5.73%
- Basic Materials: 1.40%
- Utilities: 0.46%
- Non-Classified Equity: 0.24%
- Energy: 0.21%
The QQQ investment by individual companies are as follows:
|Alphabet Inc. Class C||3.91%|
|Alphabet Inc. Class A||3.66%|
|Meta Platforms Inc.||3.31%|
The top 10 VOOG holdings are as follows:
|Alphabet Inc Class A||3.93%|
|Alphabet Inc. Class C||3.70%|
|Meta Platforms Inc.||3.56%|
|Home Depot Inc.||1.41%|
QQQ Vs. VOOG: Performance Difference
In the last 10 years, QQQ and VOOG had almost similar performances. However, QQQ ended up beating VOOG annually. But for the first year, VOOG has performed better than QQQ at 41.46% as compared to QQQ at 29.58%.
But their allocation has meant different performances as follows:
QQQ Vs. VOOG: Fees
Another major difference between the two funds is their expense ratio. The expense ratio of QQQ is 0.20%, while the expense ratio of VOOG IS 0.10%. Therefore, QQQ has an expense ratio that is twice that of VOOG.
When buying VOOG shares, you will not be charged any load fees. There will also be no redemption or purchase fees taken from the investment.
QQQ Vs. VOOG: Fund Size Comparison
The number of assets under VOOG and QQQ are similar. While QQQ has $215.95 billion, VOOG has assets worth $7.96 billion.
QQQ Vs. VOOG: Which Of The Two Should You Buy?
Both of these funds are categorized as US Stocks Large Growth. This means you only need to invest in one of them but not both. The role of equity owners is to ensure the capital growth of their portfolios.
QQQ has a good reputation for providing investors with good returns in the long term. However, its main downside is that it’s volatile. Its holding concentration is also a challenge for many investors.
If your risk tolerance is low, you have a shorter time horizon, or you prefer income investment, your preference could be going out to VOOG.
With low fees and no expenses, it’s a great way of getting huge exposure to the largest growing companies in the United States.
In the end, a key aspect you should consider is your current personal finance and how you want it to grow in the future. This will complete the picture as to which fund best suits you.
You have seen the pros and cons between them, and since you only need one of these funds for your portfolio, the important thing to consider is which one fits you and your plans.
You have already done your due diligence and research on these appreciating assets, now is the time to check your finances to know which one completes your goals.
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Marjolein is a financial consultant who has built over €4,000 monthly passive income and saves over 70% of her income. Read Radicals’ inspiring story, from stuck in the 9-to-5 to loving life. Feel free to send Radical a message at the bottom of this page