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QQQ vs SPY: Which ETF Is Better Long Term?

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We Compare QQQ vs SPY:

Invesco QQQ Trust (QQQ) vs SPDR S&P 500 ETF Trust (SPY)

Choosing between two great investment options like 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, gives investors exposure to 500 of the largest companies in the United States and accounts for about three-quarters of the U.S stock market’s value.

Having said that, QQQ and SPY are not the same.

I’ll help break down their differences.

QQQ vs SPY Graphic

 

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.

QQQ is offered by Invesco

SPY is a State Street Global Advisors Trust Company fund

Another major 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 1.2%
  • Similar ETF (VOO)

Both QQQ and SPY have relatively low expense ratios however, SPY’s expense ratio is lower than QQQ.

QQQ expense ratio is 0.20%

SPY expense ratio is 0.09%

Lastly, both SPY and QQQ are exchange-traded funds (ETFs) therefore, they trade 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 is beating SPY by 5% per year.

Here is how their performance compares:

QQQ vs SPY Performance Comparison

As shown, QQQ and SPY perform 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:

QQQ vs SPY Performance Chart

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 each year, over the 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 into the technology sector.

Here is QQQ vs SPY holdings side by side:

QQQ vs SPY Holdings

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 and QQQ Differences

SPY vs QQQ differs in that SPY holds five times as many stocks.  QQQ holds roughly 100 stocks making it smaller in size compared to most other ETFs.

By investing in an ETF with more holdings you are helping 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 both Exchange-Traded Funds (ETFs), so there is no minimum investment.

The only requirement is the need to purchase at least one full share.

Normally, fractional shares are not available 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 sitting idle until you have enough to purchase a full share.

This is especially beneficial when it comes to buying SPY because of its high share price.

 

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.

QQQ Profile

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 composition of the index each quarter and adjusts weightings if the distribution requirements are not met.

 

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 Performance

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 incredibly good 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 that is focused majorly on technology companies.

Here are the top holdings for QQQ:

QQQ Top Holdings

QQQ is largely 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, which makes it the first exchange-traded fund listed in the U.S.  SPY is also one of the most popular ETFs funds available.

It currently 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.

These stocks are selected by the S&P Committee.

 

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.

The goal of SPY is to mirror the results of the S&P 500 index.

Here is the growth of $10,000 over 10 years with SPY:

SPY Performance Chart

 

SPY Holdings

The top 10 holdings for SPY make up 28% of its total assets.

These are the top 10 holdings for SPY:

SPY Top 10 Holdings

SPDR S&P 500 ETF Trust (SPY) is largely made up of 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.

Some of the higher returns provided by QQQ are offset by its higher expense ratio.

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 are seeking the highest possible returns and can handle the increased volatility then QQQ offers better returns at a higher risk.

Lastly, it’s important to consider costs and fees because they can cost you in the long term, 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 SPY, QQQ, and thousands of other stocks/ETFs.

Related Posts:

 

Is SPY or QQQ Better for Financial Independence?

Both SPY and QQQ can get you to Financial Independence Retire Early (FIRE).  They both have performed great 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 are interested in a Vanguard ETF with similar returns to QQQ but at half the price, take a 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.

The truth is 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 would prefer SPY.

That being said, 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.

 


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.
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