We are going to explore the difference between Invesco QQQ Trust (QQQ) vs ARK Next Generation Internet ETF (ARKW).
There are no shortages of fund options when it comes to selecting your investments.
Choosing between two funds can be difficult, but I will make it easy for you to decide between QQQ and ARKW.
QQQ vs ARKW
The primary difference between QQQ and ARKW is the company that offers the exchange-traded fund (ETF). ARKW is offered by ARK Invest, while Invesco offers QQQ.
ARK Invest offers ARKW
Invesco offers QQQ
Another significant difference is the way the ETF is managed. ARKW is actively managed, which means fund managers are trying to beat the market. QQQ is passively managed, which means it only tries to match the performance of the index it tracks (Nasdaq 100 Index).
QQQ:
- Tracks the performance of the Nasdaq-100 Index
- It has an expense ratio of 0.20%
- No minimum initial investment
- Holds 100 stocks
ARKW:
- Actively managed fund
- It has an expense ratio of 0.79%
- No minimum initial investment
- Holds 44 stocks
QQQ vs ARKW Performance
QQQ and ARKW have performed differently over the last few years. The average 3-year returns of ARKW are -13.47%, while QQQ is 7.95%. Also, over the last 5 years, QQQ is beating ARKW with average returns of 11.78% per year compared to -1.53% yearly returns for ARKW.
Similarities between QQQ and ARKW:
- Exchange-Traded Funds (ETFs)
- Focused On Growth Companies
- Similar Amount Of Holdings (100 vs 44)
Here is how their performance compares:
As you can see, they perform very differently, with QQQ beating ARKW in the short term by over 30% and QQQ beating ARKW by 10% over the last 5 years.
ARKW and QQQ Differences
The main difference between QQQ and ARKW is that ARKW is an actively managed ETF, while QQQ is passively managed. QQQ holds roughly 100 stocks making it larger compared to ARKW. Investing in an ETF with more holdings helps you diversify your portfolio and minimize risk.
Differences between QQQ and ARKW:
- Different Number Of Holdings (~100 vs ~44)
- Level Of Diversification
- Expense Ratio (ARKW is more expensive at 0.79%)
ARKW Profile
- Fund Inception: 2014
- Expense Ratio: 0.79%
- Number Of Stocks: 44
- Top 10 Holdings: 55%
Here are the top 10 holdings for ARK Next Generation Internet ETF (ARKW):
The fund has $5.5 billion in total net assets.
ARKW comprises Tesla, Grayscale Bitcoin Trust, Coinbase, Teladoc, Twitter, and Spotify. ARKW provides exposure to over 40 stocks. However, with the top 10 holdings making up more than 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
QQQ and ARKW are both exchange-traded funds (ETFs) which mean there is NO minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance. ***(Get $100 When You Use This Link To Create An Invest Account and Deposit $5,000 Within 30 Days)***
Normally, 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 when it comes to shares of QQQ or ARKW due to their high prices per share (~$360/Share and $153/Share, respectively).
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)
ARKW Historical Returns
Take a look at the performance chart below. You can see that ARKW (Green) has mainly outperformed the S&P 500 (Purple) year to date.
ARKW (Green) S&P 500 (Purple)
However, be mindful that this does not guarantee that these returns will continue to look the same over the long term.
QQQ Profile
- Fund Inception: 1999
- Expense Ratio: 0.2%
- 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 mainly of technology companies that are high in growth.
QQQ was created in 1999 and currently has an expense ratio of 0.20%, significantly less than the ARKW expense ratio of 0.79%.
To put some perspective on that, here is what a 0.59% fee (difference between ARKW 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 ~$459,000 less in your account due to the fee because of the extra 0.59% expense ratio. That 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 QQQ or ARKW?
QQQ and ARKW are both high-growth ETFs. QQQ offers more diversification since it holds about 2 times as many stocks. However, this hasn't made a big difference in their performance over the last 3 years.
QQQ is the better option for long-term investors due to its lower expense ratio.
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 ARKW, QQQ, and thousands of other stocks/ETFs.
Is ARKW or QQQ Better for Financial Independence?
QQQ is better for Financial Independence Retire Early (FIRE). It has significant returns on investment with a relatively low expense ratio.
Being part of the FIRE community, we aim for the lowest fees possible, and we're a big fan of Vanguard.
Therefore, I recommend comparing some of Vanguard's most popular ETFs to see if they fit your investment needs and for a much lower expense ratio.
Here are a few comparisons I've made:
My Winner: QQQ
My winner is QQQ because of its lower expense ratio and the fact that it's passively managed.
From the example above, the difference in cost between these funds equals ~$459,000 over 30 years. This is money I would rather have compounding in my portfolio.
Many studies have also proven that over the long term, passively managed funds beat actively managed funds.