QQQ vs. VOO: Which Is The Higher ETF?

ETFs supply range and a few sense of stability because you don’t have to fret about monitoring the inventory market each day. Two of one of the best ETFs accessible are QQQ and VOO. Each of those comply with a special index, and so they can help you put money into a few of the largest corporations in the marketplace.

Each QQQ and VOO are nice funding choices for people with a long-term investing horizon, however which is finest for you? Let’s check out the variations and similarities between these two in style funds that will help you make an knowledgeable resolution on your cash.

The Quick Model:

Vanguard gives the VOO ETF, whereas Invesco gives QQQ. VOO tracks the S&P 500, and QQQ tracks the Nasdaq-100.
Investing in QQQ is riskier, nevertheless it comes with the potential for larger rewards since this fund invests closely in tech-related shares, that are vulnerable to speedy progress throughout a bull run.
VOO offers you with on the spot diversification since this fund invests within the S&P 500, so it has 5 occasions as many holdings as QQQ.

What are QQQ and VOO?

QQQ and VOO are the ticker symbols for 2 in style ETFs. Change-traded funds or ETFs, are investments that swimming pools securities collectively and commerce as if it was s inventory on the trade. Each of those funds observe a particular market cap-weighted index and maintain a wide range of investments to provide you publicity to a few of the largest corporations in the marketplace. Whereas VOO is a Vanguard index ETF, QQQ is an Invesco ETF that tracks the Nasdaq-100 index.

Traders typically belief QQQ and VOO with their funds as a result of these investments offer you publicity to the inventory market with out counting on attempting to trace particular person shares, which has confirmed to be extraordinarily dangerous over the previous couple of years. You can even buy VOO because the Admiral Shares mutual fund (VFIAX).

Each of those ETFs have been round for a very long time with lengthy histories of regular progress for buyers. The foremost distinction when evaluating QQQ vs VOO is the kinds of corporations that they put money into, as QQQ tends to be extra teach-heavy, whereas VOO invests in a wide range of totally different industries.

An Introduction to QQQ

QQQ tracks the Nasdaq-100, that are the 100 largest non-financial corporations. Which means QQQ is closely investing in know-how. This fund permits buyers to place their cash into the 100 greatest non-financial corporations that commerce on the Nasdaq.

Index it tracks: Nasdaq-100
Expense ratio: 0.2%
Final quarterly dividend: $1.97
Dividend yield: 0.68%

Following the Nasdaq-100, QQQ holds 102 shares.

Holdings

These are the highest ten holdings of QQQ:

Apple Inc. (AAPL)
Microsoft Corp. (MSFT)
Amazon.com Inc. (AMZN)
Alphabet Inc Class C (GOOGL)
Alphabet Inc Class A (GOOG)
Tesla Inc. (TSLA)
NVIDIA Corp. (NVDA)
PepsiCo (PEP)
Costco Wholesale Corp. (COST)
Meta Platforms Inc Class A (META)

Sectors

That is how the totally different sectors are weighted inside the QQQ fund.

Info Expertise: 50.19%
Communication Companies: 15.25%
Client Discretionary: 14.27%
Heath Care: 7.62%
Client Staples: 7.24%
Industrials: 3.94%
Utilities: 1.48%
Not categorized: 0.16%

An Introduction to VOO

VOO (VOO.IV) represents the Vanguard S&P 500 ETF because it’s a basket of assorted securities that observe the S&P 500 Index. The S&P 500 is a mixture of 500 large-cap US corporations.

Index it tracks: S&P 500
Expense ratio: 0.03%
Final quarterly dividend: $1.46/share
Dividend yield: 1.77%

Traditionally talking, large-cap corporations are safer however don’t present the identical progress potential that you’d discover with smaller corporations.

Holdings

Apple Inc. (AAPL)
Microsoft Corp. (MSFT)
Amazon Inc. (AMZN)
Tesla Inc. (TSLA)
Alphabet Inc. Class A (GOOGL)
Berkshire Hathaway Inc. Class B (BRK.B)
UnitedHealth Group Integrated (UNH)
Alphabet Class C (GOOG)
Exxon Mobil Company (XOM)
Johnson & Johnson (JNJ)

Sectors

That is how the totally different sectors weighted inside the VOO fund. It’s price mentioning once more that the weights given listed below are the identical because the S&P 500.

Primary supplies: 2.26%
Client Cyclical: 10.52%
Monetary Companies: 13.52%
Actual Property: 2.72%
Client Defensive: 7.33%
Healthcare: 15.31%
Utilities: 2.43%
Communication Companies: 7.31%
Power: 5.33%
Industrials: 8.63%
Expertise: 23.45%

Additional Studying: The way to Spend money on the S&P 500 Index

QQQ vs. VOO Efficiency

Now that we’ve checked out what these funds put money into, it’s time to see how the ETFs have carried out just lately and over the previous couple of years to grasp what to anticipate. Each funds have been in a position to improve in worth over time up till the market volatility of 2022. As we’ve all noticed, the inventory market swings brought on by hovering inflation, persistent charge hikes, and international conflicts have impacted each firm.

When evaluating the annual returns for each funds, in 2021, VOO returned 28.66% by market value, whereas QQQ returned 27.24%. Each funds gave buyers related performances as each supplied distinctive returns. In 2020, QQQ had a file yr with returns of 48.60%, whereas VOO had returns of 18.35% in the identical yr. That yr is proof of the overall sentiment {that a} fund like QQQ will carry out higher throughout a bull run since tech shares can expertise speedy progress when the financial system’s booming.

In 2022, the state of affairs is barely totally different because of macroeconomic points, and each funds have dropped in worth. So it wouldn’t matter which fund you selected to put money into as a result of VOO is down 15.01%, whereas QQQ has dropped 27.79% (as of December 14th 2022). The QQQ drop has been extra vital this yr because the fund is closely invested in tech. It’s price repeating that it’s tough to seek out any ETF that gained’t be impacted by the market swings we’ve skilled.

Up to now 10 years, VOO has returned buyers a mean of 12.94% after taxes and the sale of fund shares. QQQ has been round since 1999, however when trying on the numbers from the earlier decade, the corporate has returned buyers a mean of 16.93% after taxes and the sale of fund shares.

QQQ vs. VOO Dividends

Each of those funds pay dividends to buyers on a quarterly foundation. Many buyers will typically search for regular revenue from dividends since you may’t all the time assume that your shares will offer you regular progress. QQQ has a dividend yield of 0.72% whereas VOO gives a greater dividend yield of 1.59%. The newest dividend cost for QQQ on 09/23/2022 was for $0.51856/share. The newest dividend cost for QQQ on 10/03/2022 was for $1.469/share.

QQQ vs. VOO Key Variations and Similarities

There are just a few similarities between the funds. Since VOO basically tracks the S&P 500 whereas QQQ tracks the biggest non-financial corporations on the Nasdaq, there’s actually an overlap between QQQ and VOO concerning shares, as they share about 78 securities.

Since each are ETFs, you should purchase them with any brokerage you utilize with no minimal funding. Nonetheless, the similarities between QQQ and VOO cease there, as these funds range because of the nature of the index that every follows respectively. These are utterly totally different investments.

The highest ten holdings of VOO make up about 26% of the portfolio, whereas the highest ten holdings for QQQ make up 55% of its portfolio. The consequence of that is that the efficiency of corporations like Apple, Microsoft, and Amazon will vastly impression the efficiency of the QQQ fund.

Relating to the administration expense ratio, QQQ prices 0.2%, whereas VOO has an expense ratio of 0.03%. Since bills can add up, it’s important to look out for funds that scale back the expense ratio, as this can be a assured method to improve returns. With QQQ being six occasions dearer than VOO, that is one thing to consider.

The important thing distinction when evaluating QQQ vs. VOO is {that a} totally different firm gives every fund. Vanguard gives the VO, and Invesco gives QQQ. From there, it’s necessary to notice that the funds have a considerable distinction within the variety of holdings they’ve. VOO holds 5 occasions as many shares as QQQ because the fund tracks the S&P 500,

The shares within the QQQ fund have a possible for larger progress, however in addition they include the next valuation, which may very well be a difficulty in right now’s market as many corporations are proving to be delicate to the speed hikes which can be impacting shopper spending. There are extra inherent dangers concerned with investing in QQQ because the fund has fewer holdings and it has an emphasis on know-how. The QQQ ETF isn’t a broad market fund and is closely invested in know-how.

Since VOO follows the S&P 500, it’s unlikely to beat the market, so you may’t anticipate above-average returns once you make investments on this fund. Nonetheless, because the fund invests within the greatest corporations, you’ve gotten on the spot diversification that you just wouldn’t discover with QQQ.

You’re prone to expertise some volatility when any safety in 2022, however there’s barely extra danger concerned with investing your cash in QQQ proper now.

Additional Studying: 8 Greatest Vanguard ETFs

The Backside Line: Which One Makes Sense For You?

How are you going to determine between these two funding choices? As all the time, your investments rely in your danger tolerance and monetary targets.

Nonetheless, typically talking, most buyers who aren’t eager on observing the market carefully could be higher off investing within the Vanguard S&P 500 ETF since you may personal the general large-cap market, making it simpler to remain dedicated by the ups and downs.

On the flip aspect, in the event you’re searching for faster progress, you’re going to need to put money into the QQQ because it has traditionally confirmed to develop sooner when you have the chance tolerance to deal with the market volatility that has been current in 2022.