It can be challenging to decide if you should invest in QQQ vs QQQM.
This article will explore related facts and figures to understand the difference between these ETFs.
We’ll focus on understanding similarities, differences, market impacts, and which one you should choose.
QQQ vs QQQM
The main difference between QQQ and QQQM is their expense ratio. QQQ has an expense ratio of 0.20%, while QQQM has a lower expense ratio of 0.15%.
They both track the same index, which is the Nasdaq-100.
The following are some of the basic comparisons between QQQ vs QQQM.
QQQ is comparatively more liquid. Therefore, day traders and financial institutions prefer to invest in this ETF.
Further, it’s a large fund in size.
On the other hand, QQQM is comparatively less liquid. Therefore, long-term investors prefer to invest in this ETF since they don’t need short-term liquidity.
QQQM is also preferred among investors looking to pay the lowest investment fees.
In addition, the size of assets under QQQ amounts to $109 Billion. Only five ETFs in the United States have net assets of more than $100 billion.
On the other hand, the size of assets under the QQQM fund amounts to $7 Billion. It’s comparatively new, that’s why its size is not significant.
However, it has aggressively grown in a short time.
Again, the expense ratio for QQQ is 0.20% which is comparatively higher. It’s important to note that the expense ratio means the percentage of the assets used in administrative activities.
These activities include general funds management, advertising, and other expenses related to funds management.
On the contrary, the expense ratio for QQQM is 0.15% which can make a significant difference over the long term.
QQQ
- Inception Date: 1999
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.20%
- Number Of Stocks: 103
- Top 10 Holdings: 53%
QQQM
- Inception Date: 2020
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.15%
- Number Of Stocks: 104
- Top 10 Holdings: 53%
Similarly, it’s important to note that QQQ launched in 1999. So, its performance has been tracked for decades since QQQM launched in 2020.
This makes QQQM a new ETF comparatively.
QQQ vs QQQM Performance
QQQ and QQQM have performed similarly over the last year, with QQQM beating QQQ by 0.15%. However, we can’t compare them over 10 years since QQQM is a new ETF.
Here is how their performance compares:
Performance evaluation is one of the most prominent factors when selecting an investment vehicle. Although, past performance does not guarantee a future return.
Yet, it helps understand the behavior and potential of the security to generate a return.
In addition, before proceeding with this detailed performance analysis, it’s essential to remember that QQQ is an established fund with decades of history.
On the other hand, QQQM was created in 2020.
Here is the performance chart for QQQM and QQQ:
The performance metric suggests no significant difference between QQQ and QQQM. The monthly return generated by both securities is nearly 7%.
Similarly, quarter, year-to-date, and one-year performance are the same.
The logic behind the same return is that there is no massive difference in the investment portfolio of both ETFs.
In simple words, the investment of QQQ lies in the same companies as QQQM, as discussed in the next section.
Hence, the performance of both ETFs in terms of return is the same with minimal difference.
Again, it’s important to note that long-term performance data is unavailable for QQQM because it’s a new ETF and started in 2020.
QQQ vs QQQM Holdings
QQQ and QQQM have the same top 10 holdings in almost the same proportions. Both ETFs invest in large-cap stocks.
The proportion of investment in the portfolio is known as holding.
Here are the top holdings for QQQM and QQQ:
QQQ is a well-diversified ETF as it has invested in different industry sectors. The sectors include information technology, automotive, energy generation, e-commerce, and electronics.
The total holding number for QQQ amounts to 103, and the top ten holdings constitute 53.58% of the total assets.
It means the performance of the top 10 holdings significantly impacts the return generated by QQQ.
The holding structure of QQQM is mostly the same as QQQ, with a difference in a few companies.
From a holdings perspective, there is no significant difference between QQQ and QQQM.
QQQ vs QQQM Expense Ratio
The difference in expense ratio between QQQ and QQQM is 0.05%. QQQ has an expense ratio of 0.20%, while QQQM has an expense ratio of 0.15%.
Example:
Assuming you start with an initial investment of $100,000 and contribute $10,000 yearly over 30 years.
Your account will have $50,000 less because of the extra 0.05% expense ratio.
This difference for a long-term investor could be considered significant.
Winner: QQQM with the lowest expense ratio of 0.15%
Similarities Between QQQ and QQQM
The following are some of the similarities between QQQ and QQQM:
- First, both are ETFs which means they carry an underlying group of assets/securities.
- Large Cap Growth Equities back both ETFs.
- Both funds provide risk and reward exposure to the top 100 non-financial companies, including Amazon, Apple, Walmart, CVS health, etc. In simple words, the performance of both ETFs is affected by the performance of these companies.
- Invesco Management Company manages both ETFs. It’s a US-based independent investment company. This company is considered one of the leading players in the financial industry.
- Both ETFs track the Nasdaq 100 index. It means their valuation varies in line with the index.
QQQ vs QQQM Comparison
The primary difference between QQQ and QQQM is their expense ratio. QQQ has an expense ratio of 0.20%, while QQQM has a lower expense ratio of 0.15%.
The following table summarizes a comparison between QQQ vs QQQM:
The given table helps us understand the following essential aspects of these ETFs.
- Invesco issues both ETFs
- Both invest in large-cap companies
- QQQ is an older and more established ETF in comparison to QQQM
- The volume of QQQ is much higher
- The expense ratio for QQQ is higher
- Holdings for both ETFs are more or less the same
- The dividend yield is lower for QQQ
QQQ Profile
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.20%
- Number Of Stocks: 103
- Top 10 Holdings: 53%
- 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 there is no guarantee that 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 $135 billion in total assets.
QQQ Holdings
QQQ is the fourth-most popular ETF globally, 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
QQQ and QQQM are exchange-traded funds (ETFs), so there is no minimum investment.
The only requirement is the need to purchase at least one total share.
Typically, fractional shares are unavailable for ETFs unless you use M1 Finance. (Get $50 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 total share.
This is especially beneficial when buying QQQ because of its high share price.
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QQQM Profile
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.15%
- Number Of Stocks: 104
- Top 10 Holdings: 53%
- Technology Weighted
Invesco NASDAQ 100 ETF (QQQM) is a growth ETF launched in 2020. QQQM is designed to track the Nasdaq 100 index with a lower expense ratio of 0.15%.
The Nasdaq 100 index includes securities of 100 of the largest domestic and international non-financial companies listed on the Nasdaq.
It is also rebalanced quarterly and reconstituted annually.
QQQM Performance
QQQM only has performance returns for the last year but has performed well with a return of 11.60%. This is in line with the Nasdaq 100 index it seeks to track.
Here is how QQQM compares in performance to its underlying index:
QQQM has performed well short term and can be expected to continue to perform well over the long term.
The fund has $7 billion in total assets and is multiplying.
QQQM Holdings
QQQM is focused on top technological companies. A large portion of its holdings is U.S based growth companies.
These companies cut across various industries, including:
- Cloud Computing
- Payment Services
- Electric Vehicles
- Data Collection
QQQM excludes financial companies.
Here are the top holdings for QQQM:
QQQM is primarily made up of Apple, Microsoft, Amazon, and Tesla.
Which Is Better QQQ or QQQM?
QQQM has a lower expense ratio of 0.15% compared to the expense ratio of QQQ, which is 0.20%. In this way, QQQM is significantly better than QQQ.
This article has compared these ETFs in terms of a basic comparison, trend performance, and holdings.
A basic comparison concludes that both ETFs are backed by large-cap securities, tracking the Nasdaq 100 index, and are passively managed.
However, QQQ is more extensive and more stable with decades of trading. On the contrary, QQQM is new and smaller in size.
Performance comparison suggests that the performance of both ETFs is more or less the same. There is not much difference because their holdings are almost the same.
Holding comparison suggests that both ETFs have invested in around 100 securities.
Also, more than 50% of the holdings are concentrated in ten companies. These top ten companies are the same for both ETFs.
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Winner: QQQM
My winner is QQQM because of its lower expense ratio. Both are Invesco ETFs with similar performance, holdings, and management styles.
Therefore, the deciding factor is that QQQ’s expense ratio is higher than QQQM, while their performance is not much different.
Therefore, investing in QQQM over QQQ can significantly impact the performance of your portfolio due to fees.
Frequently Asked Questions (FAQs)
Why Is QQQ Called Unit Investment Trust?
QQQ is called unit investment trust because it’s a portfolio of stocks fixed for a set period. Generally, its purpose is to provide capital appreciation to the unitholder.
Why Is QQQM Called An Open-Ended Fund?
QQQM is an open-ended fund because it can issue unlimited shares. In this type of fund, the sponsor can directly give shares to the subscriber, and it can redeem the units as well.
So, it provides greater flexibility in managing funds.
What Makes ETFs a Good Choice To Invest?
The following attributes make ETFs a good investment choice:
- ETFs carry higher liquidity
- ETFs fee is comparatively lower
- A significant variety of ETFs is available in the markets. For instance, ETFs can be backed by bonds, stocks, commodities, currencies, real estate, etc.
- Investors can choose to invest in active or passive style management.
What’s The Difference Between ETFs and Mutual Funds?
ETFs can be traded throughout the day, while mutual funds trade at the end of the day. Both mutual funds and ETFs are pooled investment options.
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.
