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QQQ vs ARKW: Which Is The Best ETF Of The Future?

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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

QQQ is offered by Invesco

Another significant difference is the way the ETF is managed.  ARKW is actively managed which means fund managers are actively trying to beat the market.  QQQ is passively managed which means it is only trying to match the performance of the index it tracks (Nasdaq 100 Index).

QQQ:

  • Tracks the performance of the Nasdaq-100 Index
  • Has an expense ratio of 0.2%
  • No minimum initial investment
  • Holds 100 stocks

ARKW:

  • Actively managed fund
  • Has an expense ratio of 0.79%
  • No minimum initial investment
  • Holds 44 stocks

QQQ vs ARKW Graphic

 

QQQ vs ARKW Performance

QQQ and ARKW have performed differently over the last few years.  The 3-year returns of ARKW are 225% while QQQ is only 132%.  However, this year QQQ is beating ARKW with returns of 25% compared to only 4% 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:

QQQ vs ARKW Performance

As you can see, they perform very differently with QQQ beating ARKW by 20% this year and ARKW beating QQQ by 92% over the last 3 years.

 

ARKW and QQQ Differences

QQQ vs ARKW primarily differ in that ARKW is an actively managed ETF and QQQ is passively managed.  QQQ holds roughly 100 stocks making it larger compared to ARKW.  By investing in an ETF with more holdings you are helping 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):

ARKW Top 10 Holdings

The fund, as of September 2021 has $5.5 billion total net assets.

ARKW is largely made up of 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 $50 When You Use This Link)***

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 sitting idle until you have enough to purchase a full 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).

 

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 vs S&P 500 Performance

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 of mainly technology companies that are high in growth.

QQQ was created in 1999 and currently has an expense ratio of 0.2% which is 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 each year, over the 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 Top 10 Holdings

QQQ is largely 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 21.25% per year as of June 2021.

QQQ is an incredibly popular ETF with about 174.51B in net assets.  It has performed well over the last 10 years but again there is no guarantee the next 10 years 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.

I would say 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 it’s so important to purchase and sell your shares commission-free.

Again a great way to do this is with M1 Finance.  You can purchase fractional shares for free and they give you the ability to buy ARKW, QQQ, and thousands of other stocks/ETFs.

 

Is ARKW or QQQ Better for Financial Independence?

Both ARKW and QQQ can get you to Financial Independence Retire Early (FIRE).  They both have great returns on investment but unfortunately neither are low-cost options.

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.

There have also been plenty of studies proving that over the long term passively managed funds beat actively managed funds.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

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.