QQQ vs SCHD: Which ETF Is Better?
We Compare QQQ vs SCHD:
We will explore the difference between Invesco QQQ Trust (QQQ) vs Schwab U.S. Dividend Equity ETF (SCHD).
Choosing between two funds can be difficult, but I will make it easy to decide between QQQ vs SCHD.
QQQ vs SCHD
The primary difference between QQQ and SCHD is the company that offers the exchange-traded fund (ETF). Charles Schwab offers SCHD, while Invesco offers QQQ.
They also track different indexes. SCHD tracks the Dow Jones U.S Dividend 100 Index, while QQQ tracks the NASDAQ 100 Index.
QQQ invests primarily in the technology, communication, and consumer discretionary sectors and is expected to have high growth potential.
On the other hand, SCHD is an ETF that invests in a diversified portfolio of U.S. companies with a history of consistently paying dividends.
The companies in SCHD are generally more established, focusing on providing steady income to investors rather than high growth potential.
Another significant difference is their expense ratio, with QQQ having an expense ratio of 0.20% compared to 0.06% with SCHD.
Invesco offers QQQ.
Charles Schwab offers SCHD.
QQQ and SCHD have the same number of holdings of 103.
QQQ
- Tracks the performance of the Nasdaq-100 Index
- It has an expense ratio of 0.20%
- No minimum initial investment
- Holds 103 stocks
SCHD
- Fund Inception: 2011
- Offered By Charles Schwab
- Tracks Dow Jones U.S Dividend 100 Index
- Expense Ratio 0.06%
- Number Of Stocks: 103
- Dividend Yield 3.07%
Invesco's QQQ focuses on technology and growth-oriented companies, while SCHD focuses on established companies with a history of paying dividends.
QQQ vs SCHD Performance
QQQ and SCHD have had different performance returns over the last 10 years, with QQQ beating SCHD by 5.55% annually.
Here is how their performance compares:
Here is another comparison of short-term performance:
Again, as you can see, they have performed differently over the short and long term.
This performance is because they both aim to have different market exposure.
QQQ vs SCHD Holdings
Invesco's QQQ and Charles Schwab's SCHD have the same number of holdings which is 103 stocks in the ETF.
QQQ's top holdings are heavily concentrated in the technology sector, with companies such as Apple, Microsoft, Amazon, Meta, and Alphabet (Google) among its largest holdings.
Over 50% of QQQ's holdings are in the technology sector, with communication services and consumer discretionary sectors also having significant weightings.
In contrast, SCHD's top holdings are more diversified across sectors, with its largest holdings being in the consumer staples, information technology, and healthcare sectors.
Additionally, as a dividend-focused ETF, SCHD tends to hold companies with a history of paying consistent dividends, such as Procter & Gamble, Coca-Cola, and Johnson & Johnson.
Here are QQQ and SCHD holdings side-by-side:
The key distinction in the holdings of QQQ and SCHD lies in their sector concentration and stock selection.
QQQ has a greater emphasis on technology and growth-oriented companies, whereas SCHD is more diversified and prioritizes companies with a history of dividend payments.
QQQ vs SCHD Overlap
There is an overlap between QQQ and SCHD that includes 8 stocks. 8% of the holdings in QQQ are also in SCHD, and only 8% of SCHD's holdings are in QQQ.
Here are SCHD and QQQ holdings overlap:
Here is their overlap by weight:
This highlights the fact that QQQ and SCHD track different sectors of the market.
QQQ and SCHD Differences
The main difference between QQQ and SCHD is the index they track. QQQ tracks the Nasdaq-100 Index and has a higher expense ratio while focusing on the technology sector. SCHD tracks the Dow Jones U.S Dividend 100 Index, which invests in dividend-paying companies and is managed by Charles Schwab.
Both ETFs have relatively low expense ratios compared to actively managed funds.
However, QQQ's expense ratio of 0.20% is slightly higher than SCHD's expense ratio of 0.06%.
Lastly, QQQ provides more liquidity with $164 billion in net assets compared to $34 billion with SCHD.
Investing in an ETF with a lower expense ratio helps you keep more of your portfolio returns.
Differences between QQQ and SCHD:
- Brokerage (QQQ is Invesco, SCHD is Schwab)
- Sector Diversification
- Liquidity
- Tracking Index
QQQ Profile
- Fund Inception: 1999
- Expense Ratio: 0.20%
- Number Of Stocks: 103
- Top 10 Holdings: 55.70%
The Invesco QQQ Trust (QQQ) exposes investors 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 0.20%, which isn't high, but compared to SCHD, it is 3 times more expensive to own QQQ.
To put some perspective on that, here is what a 0.14% fee (difference between SCHD 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 $139,000 less in your account due to the fee because of the extra 0.14% expense ratio.
That does not include costs to buy and sell your shares.
QQQ Performance
Over the last 10 years, QQQ has outperformed the S&P 500 with an average return of 17.35% annually.
Here is the growth of $10,000 over 10 years with QQQ:
QQQ has performed well over the last 10 years, but again there is no guarantee the next 10 years will look the same.
Since its inception, QQQ has shown outstanding performance, consistently outperforming the S&P 500 benchmark index.
The fund ranks in the top 1% of large-cap growth funds.
Due to QQQ's outstanding performance, the fund has become one of the most popular funds among long-term investors.
It now has $164 billion in total assets.
QQQ Holdings
QQQ is the fourth-most popular ETF in the world, with 103 securities holdings, most of which are top technological companies.
These companies cut across various industries, including:
- Cloud Computing
- Payment Services
- Electric Vehicles
- Data Collection
QQQ excludes financial companies. Invesco's QQQ is a large capitalization index focused on technology companies.
Here are the top holdings for QQQ:
QQQ is primarily made up of Apple, Microsoft, Amazon, and Tesla.
No Minimum Investment
SCHD and QQQ are exchange-traded funds (ETFs), so there is no minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance. (Use this link for a $100 bonus)
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. This is great for shares of QQQ due to its high prices per share.
There are two easy ways to invest in QQQ or SCHD commission-free.
- Invesco to invest in QQQ or Charles Schwab for SCHD
- M1 Finance to invest in either QQQ or SCHD. (Use this link for $100 when you open a new account)
Both of these options are free. This is important because fees can lower our returns.
M1 Finance is the best option because it lets you purchase QQQ, SCHD, and thousands of other stocks.
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 quickly 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)
SCHD Description
The Schwab U.S. Dividend Equity ETF (SCHD) was launched in October 2011 as a fund that seeks to track the total return of the Dow Jones U.S. This means that the fund tracks the performance of the Dow Jones U.S. Dividend 100 Index to replicate its total returns.
The SCHD exchange-traded fund is passively managed and designed to give investors broad exposure to the Large Cap Value segment of the U.S. equity market.
It has amassed over $45 billion in assets, making it one of the largest ETFs attempting to match the Large Cap Value portion of the U.S. equity market.
Large-cap companies are more stable than mid and small-cap companies. This means less risk for investors.
It can also be a more reliable source of cash flow as these companies usually have a market capitalization of $10 billion and above.
SCHD Performance
SCHD closely monitors and seeks to replicate the performance of its underlying index, the Dow Jones U.S. Dividend 100 Index.
The Dow Jones U.S. Dividend 100 Index is one of the top funds in the United States.
The Index measures the performance of high dividend-yielding stocks issued by U.S. companies.
These are stocks that have, over the years, shown consistency in paying dividends which is their primary advantage over other companies.
As you can see, SCHD has performed well since its inception in 2011.
The ETF has a beta of 0.96 and a standard deviation of 22.79% for the trailing three-year period. This makes SCHD a medium-risk choice in its class.
The fund has roughly 103 holdings.
For investors looking for a fund to expose them to the Large Cap Value segment of the market, Schwab U.S. Dividend Equity ETF may be a good option based on selected vital benefits.
These include expense ratio, expected asset class return, and momentum.
SCHD Costs
Cost is a vital factor to consider when choosing an ETF, especially for a long-term investment strategy. To analyze the cost of an ETF, you should look at the expense ratio.
Cheaper funds tend to yield higher profits since they spend less on management.
SCHD is one of the cheapest exchange-traded funds, with an expense ratio of 0.06%.
In other words, for a $10,000 investment, the ETF charges you $6 for annual operating expenses.
SCHD Holdings
The top 10 holdings for SCHD make up 40% of its total assets.
Schwab's SCHD comprises Amgen, Coca-Cola, Merck, and Verizon and provides exposure to over 100 stocks.
With only 103 holdings in the portfolio, SCHD is less diversified than other Schwab funds like Schwab Total Stock Market Index Fund (SWTSX).
Which Is Better QQQ or SCHD?
QQQ and SCHD are different investments. They have performed differently over the last 10 years and have different expense ratios.
QQQ's expense ratio is 0.20%
SCHD's expense ratio is 0.06%.
Which is better will likely depend on your investment goals.
Invesco customers will likely prefer QQQ.
Charles Schwab customers will probably select SCHD.
QQQ may be a better choice for investors seeking growth due to its focus on the Nasdaq-100 Index, which includes many of the largest technology and growth-oriented companies.
SCHD may be a better option for investors seeking income and stability, as it invests in companies with a history of paying dividends across various sectors.
That said, slight differences could make SCHD better for some investors.
SCHD offers a significantly higher dividend yield and a lower expense ratio.
Considering costs and fees is important because they can cost you in the long run.
That's why buying 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 QQQ, SCHD, and thousands of other stocks/ETFs.
Is QQQ or SCHD Better For Financial Independence?
QQQ and SCHD have performed well enough to get you to Financial Independence Retire Early (FIRE). They have performed excellently over the last 10 years and have low expense ratios.
Being part of the FIRE community, we aim for the lowest fees possible and the most diversification.
For those reasons, I prefer SCHD over QQQ.
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My Winner: SCHD
My winner is SCHD, based on the stability it offers and its lower expense ratio.
Low fees are a guaranteed way to keep more money in your portfolio!
For even more diversification, I suggest an ETF like Vanguard's Total Market Admiral fund VTSAX.