We will explore the difference between Fidelity MSCI Information Technology Index ETF (FTEC) vs Invesco QQQ Trust (QQQ).
When it comes to investing, there is no shortage of fund options.
Choosing between two funds can be difficult, but I will make it easy for you to decide between FTEC and QQQ.
FTEC vs QQQ
The primary difference between FTEC and QQQ is the company that offers the exchange-traded fund (ETF). FTEC is offered by Fidelity, while Invesco offers QQQ.
Fidelity offers FTEC
Invesco offers QQQ.
Another significant difference is the number of stocks in each, with FTEC having 346 different companies in the index compared to 100 with QQQ.
- Tracks the MSCI USA IMI Information Technology Index
- It has an expense ratio of 0.08%
- No minimum initial investment
- Holds 346 stocks
- Tracks the performance of the Nasdaq-100 Index
- It has an expense ratio of 0.20%
- No minimum initial investment
- Holds 100 stocks
FTEC vs QQQ Performance
FTEC and QQQ have performed similarly over the last 3 years, with FTEC beating QQQ by 2%. This is significant, especially considering the difference 1% or 2% can make with compound interest.
Similarities between QQQ and FTEC:
- Exchange-Traded Funds (ETFs)
- Similar Performance Over The Long-Term
- Focused On Growth Companies
- Low Expense Ratios
Here is how their performance compares:
As you can see, they have performed differently over the last 5 years, with FTEC beating QQQ by 2.61% annually.
FTEC and QQQ Differences
The main difference between FTEC and QQQ is that FTEC holds more than three times as many stocks. QQQ has roughly 100 stocks making it smaller than most other ETFs.
By investing in an ETF with more holdings, you are helping diversify your portfolio and minimize risk.
Differences between FTEC and QQQ:
- Different Number Of Holdings (~346 vs ~100)
- Level Of Diversification
- Company Offering The Exchange-Traded Fund (ETF)
- Fund Inception: 2013
- Expense Ratio: 0.08%
- Number Of Stocks: 346
- Top 10 Holdings: 56%
Here are the top 10 holdings for Fidelity MSCI Information Technology Index ETF (FTEC):
The fund has $6.7 billion in total net assets.
FTEC comprises Apple, Microsoft, NVIDIA, VISA, and Mastercard and provides exposure to over 300 stocks.
However, with the top 10 holdings making up over 50% of the portfolio, it isn't very diversified compared to other ETFs such as Vanguard Total Stock Market Index Fund ETF (VTI).
No Minimum Investment
FTEC and QQQ are exchange-traded funds (ETFs); therefore, there is NO minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance. ***(Get $50 When You Use This Link)***
Typically, fractional shares are not available for ETFs, but with M1 Finance, you can purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment. You no longer have to keep your money idle until you have enough to purchase a total share. This is especially beneficial for shares of QQQ or FTEC due to their high prices per share.
I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.
Personal Capital's free tools allow you to easily find which of your investments has high fees so you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
FTEC Historical Returns
Take a look at the chart below. You can see that FTEC (Blue) has outperformed the S&P 500 (Light Blue) over the last year.
FTEC (Blue) S&P 500 (Light Blue)
However, remember that this does not guarantee that next year will look the same.
- Fund Inception: 1999
- Expense Ratio: 0.20%
- Number Of Stocks: ~100
- Top 10 Holdings: 55.70%
The Invesco QQQ Trust (QQQ) provides investors with exposure to a similar portfolio to the Nasdaq 100 index. The ETF is comprised mostly of technology companies that are high in growth.
QQQ was created in 1999 and currently has an expense ratio of 0.2%, which isn't high but compared to FTEC, it is more than double the cost.
To put some perspective on that, here is what a 0.12% fee (difference between FTEC and QQQ) will cost you as an investor over 30 years.
Assuming you start with an initial investment of $100,000 and contribute $10,000 yearly over 30 years. You will have roughly ~$82,000 less in your account due to the fee because of the extra 0.12% expense ratio. This does not include costs to buy and sell your shares.
Moving on, here are the top 10 holdings for QQQ:
QQQ is primarily made up of Apple, Microsoft, Amazon, and Facebook.
Over the last 10 years, QQQ has outperformed the S&P 500 with an average return of 16.22% per year.
QQQ is an incredibly popular ETF with about $174 billion in net assets. It has performed well over the last 10 years, but again there is no guarantee the next 10 years will look the same.
Which is Better FTEC or QQQ?
FTEC and QQQ are very similar investments. FTEC offers more diversification since it holds about 3 times as many stocks. However, this hasn't made a difference in their performance since they have had virtually the same returns over the last 3 years.
I would say both are excellent options for long-term investors for those reasons. However, if having a larger basket of stocks helps you sleep at night, then FTEC would be a better option.
Lastly, it's important to consider costs and fees because they can cost you in the long run, as we saw from our example above. That's why purchasing and selling your shares commission-free is essential.
Again a great way to do this is with M1 Finance. You can purchase fractional shares for free, allowing you to buy FTEC, QQQ, and thousands of other stocks/ETFs.
Here Are More Comparisons of QQQ:
Is FTEC or QQQ Better for Financial Independence?
FTEC and QQQ can get you to Financial Independence Retire Early (FIRE). They both have a similar return on investment and have low expense ratios.
Being part of the FIRE community, we aim for funds with the lowest fees possible. We are such big fans of Vanguard for its industry-leading low-cost index funds. FTEC comes closest to that profile, in my opinion.
If you are new to Fidelity, you might want to check out this article about picking the best Fidelity Core Position.
My Winner: FTEC
My winner is Fidelity MSCI Information Technology Index ETF (FTEC), solely based on its lower expense ratio. I also appreciate that Fidelity offers other low-cost ETFs like the Fidelity® ZERO Total Market Index Fund (FZROX).
Also, check out my comparison of FZROX vs VTSAX.