This article compares ARKK vs QQQ: ARK Innovation ETF (ARKK) vs Invesco QQQ Trust (QQQ).
Both Exchange Traded Funds (ETFs) are popular investments.
This article will help you decide between ARKK vs QQQ.
ARKK vs QQQ
The primary difference between ARKK and QQQ is the company that offers the exchange-traded fund (ETF). ARK Invest offers ARKK. Invesco offers QQQ.
Another significant difference is the expense ratio.
ARKK has an expense ratio of 0.75%. QQQ has an expense ratio of 0.20%.
So ARKK is more than 3 times as expensive compared to QQQ!
- Actively Managed Fund
- Expense Ratio 0.75%
- Offered By ARK Invest
- Holds Between 35 – 55 Stocks
- Tracks The Performance Of The Nasdaq-100 Index
- Expense Ratio 0.20%
- Offered By Invesco
- Holds 100 Stocks
ARKK vs QQQ Performance
ARKK and QQQ have had very different performances over the last year. QQQ has been beating ARKK by 44% over the previous year.
Over the last 3 years, ARKK and QQQ have been almost the same, with 37% returns.
ARKK (Orange) QQQ (Green)
As you can see from the chart, QQQ has significantly outperformed ARKK over the last year.
Similarities between ARKK and QQQ:
- Both Are Exchange-Traded Funds (ETFs)
- Both Focus On Growth Companies
- Similar Amount Of Holdings
ARKK and QQQ Differences
The main difference between ARKK and QQQ is that ARKK has an expense ratio of 0.75%, while QQQ has an expense ratio of 0.20%. That makes ARKK more than 3 times more expensive compared to QQQ.
Differences Between ARKK and QQQ:
- Different Number Of Holdings (~45 vs ~100)
- Company That Offers The Fund (ARK Invest vs Invesco)
- Expense Ratio (0.75% vs 0.20%)
- ARKK Is Actively Managed
- QQQ Is Passively Managed
- Fund Inception: 2014
- Expense Ratio: 0.75%
- Number Of Stocks: 35 – 55
- Actively Managed
ARKK is an actively managed ETF that looks for performance returns from companies with disruptive innovation. They define disruptive innovation as new technology that changes the way the world works.
The fund has $17.78 billion in assets under management.
ARKK was created in 2014 and currently has an expense ratio of 0.75%. This is more than 3 times the cost of QQQ, which has an expense ratio of 0.20%.
Here is what a 0.55% fee (difference between ARKK and QQQ) will cost over 30 years.
Assuming you start with an initial investment of $100,000 and contribute $10,000 yearly over 30 years. You will have $430,000 less in your account.
This does not include costs to buy and sell your shares.
ARK Invest’s ARKK has underperformed over the last year with a return of -67%.
While ARKK has a -67% return, the S&P 500 has a return of -15%.
ARKK Top 10 Holdings
ARKK’s top 10 holdings include Tesla, Teladoc, Roku, Zoom, and Coinbase. The ETF invests in companies that are in high-growth technology.
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).
How To Invest In ARKK and QQQ
The easiest way to invest in ARKK or QQQ commission-free is with M1 Finance. (Use this link for $50 when you open a new account)
M1 Finance gives you the option to invest in both options completely free. As we saw in our earlier example, this is important because fees can affect long-term returns.
You can still invest in ARKK and QQQ using other platforms, but there will likely be a charge when buying and selling shares.
I like M1 Finance as the best option because it allows you to purchase ARKK, QQQ, and thousands of other stocks.
M1 Finance also lets you purchase fractional shares. This is great for buying QQQ with its high share price of $360.
- Fund Inception: 1999
- Expense Ratio: 0.20%
- Number Of Stocks: ~100
- Top 10 Holdings: 55.70%
- Passively Managed Fund
The Invesco QQQ Trust (QQQ) was created in 1999 and has an expense ratio of 0.20%. It 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. The price-to-earnings (P/E) ratio for QQQ is 32x, and the fund has $174.51B in net assets.
Over the last 10 years, QQQ has outperformed the S&P 500 with an average return of 21.25% per year. QQQ has performed well over the last 10 years, but there is no guarantee the next 10 years will look the same.
QQQ Top 10 Holdings
Invesco QQQ’s top 10 holdings include Apple, Microsoft, Amazon, Tesla, and NVIDIA.
Which is Better ARKK or QQQ?
ARKK and QQQ are different investments. ARKK has a very high expense ratio of 0.75% and has not performed well lately.
QQQ offers many of the same features as ARKK but at a much lower expense ratio of 0.20%.
I prefer QQQ because of the lower expense ratio.
As we saw earlier, QQQ has been beating ARKK by 44% over the last year. That means investors in QQQ have had better returns at a lower cost! This would suggest that passive management is better than actively managed funds.
Keep in mind past performance does not predict future returns.
I would still choose QQQ over ARKK and purchase commission-free shares using M1 Finance. That way, I keep my costs as low as possible.
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 that 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)
Is ARKK or QQQ Better for Financial Independence?
The FIRE community is big on keeping investment costs low, and that’s why I would choose QQQ. However, I prefer a Vanguard option like VUG, MGK, or VGT.
They both have similar returns on investment and at a lower cost than QQQ.
Also, if financial independence is your goal, I would suggest looking into other funds that give you more diversification, like VTSAX.
My Winner: QQQ
My winner is QQQ based on its lower expense ratio of 0.20%. I always lean towards keeping costs as low as possible.
Returns are not guaranteed, but fees are!
If you like ETF comparisons like these, check out more in our related posts below.
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.