Two significant differences exist between FNCMX vs QQQ.
First, they differ in security type; FNCMX is a Mutual Fund while QQQ is an Exchange-Traded Fund (ETF).
Mutual funds and ETFs are identical in many ways, both providing a diversified portfolio for investors as they invest in a mix of various assets.
Although mutual funds and ETFs have their difference in how they trade, ETFs trade on more platforms.
Secondly, FNCMX and QQQ are related to Nasdaq but differ in their underlying assets.
While FNCMX tracks the Nasdaq Composite Index, QQQ tracks the Nasdaq-100 Index.
This FNCMX vs QQQ article will comprehensively compare the two funds to help you make an informed choice.
It will compare the two funds using metrics such as performance, dividends, and others.
The Fidelity Nasdaq Composite Index Fund (FNCMX) is a mutual fund belonging to the Fidelity family. The investment seeks to provide investment returns that closely correspond to the price and yield performance of the Nasdaq Composite Index.
The fund invests at least 80% of assets in common stocks included in the index.
FNCMX Performance & Returns
Fidelity’s FNCMX has a solid record in tracking the Nasdaq Composite Index. As a result, its performance closely follows the performance of the underlying index.
Its 10-year return down to 3-year is in line with the benchmark index’s returns (NASDAQ Composite TR USD).
Top 10 Holdings (43.10% of Total Assets)
Invesco QQQ Trust (QQQ) is a growth ETF launched in 1999 by Nasdaq as the Nasdaq 100 Trust, 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.
However, the fund does not mirror the fees of the underlying index.
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 not met.
QQQ Performance & Returns
Since its inception, the Invesco QQQ ETF has shown outstanding performance, consistently outperforming the S&P 500 benchmark index.
Over 10 years, the Nasdaq QQQ Invesco has outperformed the S&P 500 and significantly beat the Dow Jones Industrial Average. As a result, the fund ranks in the top 1% of large-cap growth funds.
Due to QQQ’s outstanding performance in 2021, generating approximately $17 billion in net, the fund became one of the most popular funds in that year.
Currently, the total asset of QQQ crossed the $100 billion milestones and, from then, has continued to grow and has reached a $135 billion total-in-assets.
Top 10 Holdings (53.40% of Total Assets)
QQQ is the fourth-most popular ETF globally with 102 securities holdings, most of which are top technological companies.
These companies cut across cloud computing, payment services, electric vehicles, data collection, etc. It excludes financial companies.
QQQ is a large capitalization index that is focused majorly on technology companies.
FNCMX vs QQQ Comparison
In this FNCMX vs QQQ comparison, we will be considering some salient factors that almost every investor will not overlook when choosing between two investments.
This comparison will look at costs, dividends, performance, and holdings.
QQQ vs FNCMX Performance/Annual Return
QQQ and FNCMX have performed differently over the last 10 years, with QQQ beating FNCMX by 2% annually.
This is significant, especially when you think about the difference 1% or 2% can make with compound interest.
FNCMX vs QQQ Holdings
Sector holdings for FNCMX and QQQ are similar. The most significant difference is the percentage of technology.
QQQ is weighted 6% heavier into the technology sector compared to FNCMX.
Sector Weightings (%)
Top 10 Holdings
The Fidelity Nasdaq composite index (FNCMX) is broader and has significantly better holdings than QQQ, although QQQ tracks the top 100 stocks in the Nasdaq.
FNCMX Minimum Investment
For a first-time investment in FNCMX, you need to have a minimum of $2,500. After that, you are at liberty to invest any amount you want.
As a first-time investor in QQQ, you only need to have the price of one share as a minimum investment. This means that if QQQ’s share price is $50, you can invest in the fund with as little as $50.
So if you are starting small, your best choice might be QQQ.
You could invest with no minimum requirement into QQQ using M1 Finance. (Use this link for a $50 Bonus)
FNCMX vs QQQ Cost
Fidelity Nasdaq Composite Fund (FNCMX) is slightly more expensive, with an expense ratio of 0.29%. In contrast, Invesco’s QQQ has a lower expense ratio of 0.20%.
To put some perspective on that, here is what a 0.9% fee (difference between FNCMX 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 each year over the 30 years. You will have roughly ~$74,000 less in your account due to the fee because of the extra 0.09% expense ratio.
This does not include costs to buy and sell your shares.
Lower fees can lead to significantly more money in your portfolio in the long run.
Also, QQQ is an ETF. Therefore, it offers more tax advantage in a taxable brokerage account than FNCMX.
FNCMX vs QQQ Dividends
FNCMX pays annual dividends every December. QQQ pays dividends every quarter.
Currently, the TTM dividend payout for Invesco QQQ is $1.70, and the current dividend yield is 0.50%.
The TTM dividend payout for Fidelity Nasdaq Composite Fund is $1.09, and the current dividend yield is 0.59%
FNCMX vs QQQ Which is Better?
The most significant difference between FNCMX and QQQ is that FNCMX is a mutual fund issued by Fidelity, while QQQ is an ETF issued by Invesco.
Again, FNCMX tracks the performance of the Nasdaq Composite Index, while QQQ seeks to follow the performance of the Nasdaq-100 Index.
FNCMX and QQQ are similar because the Nasdaq 100 makes up more than 90% of the weight of the Nasdaq Composite Index.
Diversification will then be one of the yardsticks to measure a better investment.
According to the Investment Company Act of 1940 (1940 Act), FNCMX operates as a non-diversified fund to an extent.
This means that QQQ is a better-diversified investment, having tech stocks and other growing sectors.
The fund owns the most valuable stocks trading on the Nasdaq. In other words, it’s weighted heavily towards the tech industry (50.6%).
Choosing QQQ is an excellent way to hold a diversified basket of most hot stocks.
QQQ also holds over $208 billion in assets and has a lower expense ratio of 0.2%.
In terms of performance, QQQ also has better performance.
All these perhaps explain why most retail investors and institutional investors love QQQ.
However, FNCMX contains some financial companies lacking in QQQ and becomes an option if you wish to include the stocks lacking in QQQ.
I hope this comparison helps you pick the fund that appeals to you and suits your investment needs.
But, with all that QQQ offers, it may be a better choice in FNCMX vs QQQ.
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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.