We Compare QQQ vs SPY:
Invesco QQQ Trust (QQQ) vs SPDR S&P 500 ETF Trust (SPY)
Choosing between two great investment options, QQQ vs SPY, can be difficult. They are both great funds and popular among investors.
Invesco QQQ Trust, QQQ, provides investors with exposure to a similar portfolio to the Nasdaq 100 index.
SPDR S&P 500 ETF Trust, SPY, invests in 500 of the largest companies in the United States and accounts for about three-quarters of the U.S. stock market’s value.
I'll help break down their differences.
QQQ vs SPY
The primary difference between QQQ and SPY is the brokerage that issues the fund. QQQ is offered by Invesco, while SPY is a fund from State Street Global Advisors Trust Company.
Invesco offers QQQ
SPY is a State Street Global Advisors Trust Company fund
Another significant difference is the index these funds track.
QQQ tracks the Nasdaq-100 Index
SPY tracks the S&P 500 Index
Both funds are incredibly popular with long-term investors.
QQQ
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.20%
- Invesco Fund
- Number Of Stocks: 100
- Top 10 Holdings: 52%
- Has Outperformed SPY Over 10 Years
- Higher Volatility Compared To SPY
SPY
- Fund Inception: 1993
- Tracks the S&P 500 Index
- Expense Ratio: 0.09%
- State Street Fund
- Number Of Stocks: 506
- Top 10 Holdings: 28%
- Yield 1.20%
- Similar ETF (VOO)
QQQ and SPY have relatively low expense ratios; however, SPY's expense ratio is lower than QQQ's.
QQQ expense ratio is 0.20%
SPY expense ratio is 0.09%
Lastly, SPY and QQQ are exchange-traded funds (ETFs), trading intraday until the markets close.
QQQ vs SPY Performance
QQQ and SPY have performed differently over the last 5 years, with QQQ beating SPY by 10% annually. Over 10 years, QQQ has been beating SPY by 5% per year.
Here is how their performance compares:
QQQ and SPY have performed differently over the last 10 years, with QQQ beating SPY over the long term.
QQQ vs SPY Chart
Here is how QQQ vs SPY compares on a chart of their short-term performance:
As you can see from the chart, SPY is beating QQQ over the last year.
You can expect higher volatility with QQQ in exchange for potentially higher returns.
SPY vs QQQ Expense Ratio
The difference in expense ratio between QQQ and SPY is 0.11%. Invesco's QQQ has an expense ratio of 0.20%, while SPY has an expense ratio of 0.09%.
Example:
Assuming you start with an initial investment of $100,000 and contribute $10,000 yearly over 30 years.
You will have $90,000 less in your account because of the extra 0.11% expense ratio.
This difference for a long-term investor could be considered significant.
Winner: SPY with the lowest expense ratio of 0.09%
QQQ vs SPY Holdings
QQQ is 63% technology, while SPY is 34%. SPY is a broad-based fund diversified in several sectors of the market. QQQ is heavily weighted in the technology sector.
Here is QQQ vs SPY holdings side by side:
The top 10 holdings for QQQ make up 52% of its portfolio, while SPY's top 10 holdings make up 28%.
This means the performance of a few stocks like Apple, Microsoft, and Amazon will have a big impact on the overall performance of QQQ.
SPY vs QQQ Differences
A significant difference between SPY and QQQ is their number of holdings. SPY holds 506 companies, while QQQ only holds 100 companies. Therefore, SPY holds five times as many stocks compared to QQQ.
Investing in an ETF with more holdings helps you diversify your portfolio and minimize risk.
Differences between SPY and QQQ:
- Different Number Of Holdings (~506 vs ~100)
- Level Of Diversification (SPY Is Better Diversified)
- Brokerage
- Expense Ratio (0.09% vs 0.2%)
- Performance (QQQ Has Better Long-Term Returns)
No Minimum Investment
QQQ and SPY are exchange-traded funds (ETFs), so there is no minimum investment.
The only requirement is the need to purchase at least one full share.
Fractional shares are not available for ETFs unless you use M1 Finance. ***(Get $100 When You Use This Link)***
M1 Finance allows you to purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment. You won't have to keep your money idle until you have enough to purchase a full share.
This is especially beneficial when buying SPY because of its high share price.
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)
QQQ Profile
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.20%
- Number Of Stocks: 100
- Top 10 Holdings: 52%
- Technology Weighted
Invesco QQQ is a growth ETF launched in 1999 by Nasdaq as the Nasdaq 100 Trust. QQQ is designed to track the Nasdaq 100 index.
The name was changed in the early 2000s after PowerShare and Invesco acquired the index.
The fund closely tracks the standards and performance of the Nasdaq 100 Trust to replicate its return results.
The Nasdaq 100 Index adopts a modified capitalization methodology that uses individual weights of included items according to their market capitalization.
Weighting allows constraints to limit the influence of the largest companies and balance the index with all of its members.
To accomplish this, Nasdaq reviews the index's composition each quarter and adjusts weightings if the distribution requirements are unmet.
QQQ Performance
Over the last 10 years, QQQ has outperformed the S&P 500 with an average return of 20.34% per year.
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 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 $135 billion in total assets.
QQQ Holdings
QQQ is the fourth-most popular ETF in the world, with 102 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.
SPY Profile
- Fund Inception: 1993
- Tracks the S&P 500 Index
- Expense Ratio: 0.09%
- Number Of Stocks: 506
- Top 10 Holdings: 28%
- Yield 1.2%
SPDR S&P 500 ETF Trust (SPY) tracks the performance of the Standard & Poor’s 500 Index (S&P 500).
SPY was created in 1993, making it the first exchange-traded fund listed in the U.S. SPY is one of the most popular ETF funds.
It has an expense ratio of 0.09% and offers exposure to over 500 stocks.
The SPDR S&P 500 ETF Trust (SPY) is considered a large blend ETF and tracks a market-cap-weighted index of large and mid-cap stocks.
The S&P Committee selects these stocks.
SPY Performance
Over the last 10 years, SPY has had an average return of 15% annually. This is almost the same as the performance of the S&P 500 over the same time frame.
SPY's goal is to mirror the results of the S&P 500 index.
Here is the growth of $10,000 over 10 years with SPY:
SPY Holdings
The top 10 holdings for SPY make up 28% of its total assets.
These are the top 10 holdings for SPY:
SPDR S&P 500 ETF Trust (SPY) comprises Apple, Microsoft, Amazon, Google, and Tesla.
However, it also provides exposure to over 500 other stocks.
QQQ vs SPY Long Term
QQQ and SPY are different long-term investments. Over the long term, SPY offers more diversification since it holds about 5 times as many stocks.
This diversification has resulted in less volatility and lower returns over the last 10 years. However, that doesn't mean the next 10 years will look the same.
Its higher expense ratio offsets some of the higher returns provided by QQQ.
SPY offers stable long-term returns with more diversification and at a lower cost.
QQQ offers the potential for higher returns with more volatility and at a higher cost.
If having a larger basket of stocks helps you sleep at night, then SPY would be a better option.
If you seek the highest possible returns and can handle the increased volatility, QQQ offers better returns at a higher risk.
Lastly, it's important to consider costs and fees because they can cost you long-term, as our example above shows. That's why purchasing and selling your shares commission-free is so important.
Again a great way to do this is with M1 Finance.
You can purchase fractional shares for free, allowing you to buy SPY, QQQ, and thousands of other stocks/ETFs.
Related Posts:
Is SPY or QQQ Better for Financial Independence?
SPY and QQQ can get you to Financial Independence Retire Early (FIRE). They have performed well over the last 10 years and have relatively low expense ratios.
Being part of the FIRE community, we aim for the lowest investment fees possible.
For those reasons, I prefer SPY over QQQ.
If you want a Vanguard ETF with similar returns to QQQ but at half the price, look at VUG.
My Winner: SPY
My winner is SPY based on the lower expense ratio and the increased diversification. SPY offers a more balanced approach to long-term investing.
No one knows if growth will continue to outpace value stocks. Past performance is no guarantee of future returns.
Lower fees are a guaranteed way to keep more money in your portfolio!
I prefer SPY.
I would also suggest considering other funds that give you more diversification, like VTSAX.
Ultimately, you should pick the investment funds that fit your goals best.