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QQQ vs VOO: Which ETF Is Best Long Term?

  • Reading time:7 mins read

We are going to explore the difference between Invesco QQQ Trust (QQQ) vs Vanguard S&P 500 ETF (VOO)

When it comes to investing there is no shortage of fund options.  Choosing between two funds can be difficult, but I will make it easy for you to decide between QQQ and VOO.

QQQ vs VOO Comparison

QQQ vs VOO

The primary difference between QQQ and VOO is the company that offers the exchange-traded fund (ETF).  VOO is offered by Vanguard while QQQ is offered by Invesco.  Another significant difference is the number of stocks in each, with VOO having 508 different companies in the index compared to 100 with QQQ.

VOO has a lower expense ratio of 0.03% compared to 0.2% with QQQ.  QQQ is more than 6 times as expensive as VOO.

VOO:

  • Tracks the performance of the S&P 500 Index
  • Has an expense ratio of 0.03%
  • No minimum initial investment
  • Holds 508 stocks
  • VOO is a broad-based stable passive index fund
  • VOO Institutional Fund Equivalent (VIIX)

QQQ:

  • Tracks the performance of the Nasdaq-100 Index
  • Has an expense ratio of 0.2%
  • No minimum initial investment
  • Holds 100 stocks
  • Has outperformed VOO over 10 years
  • Higher volatility compared to VOO

 

QQQ vs VOO Performance

QQQ and VOO have performed differently over the last 5 years with QQQ beating VOO by 10% annually.  Over 10 years QQQ is beating VOO by 6% per year.

Here is how their performance compares:

QQQ vs VOO Performance

Here is another comparison with total returns:

QQQ vs VOO Performance Chart

As you can see, they perform differently over the last 10 years with QQQ beating VOO over the long term.

You can expect higher volatility with QQQ in exchange for that higher return.

 

QQQ vs VOO Holdings

QQQ is 63% technology while VOO is 34%.  VOO is a broad-based fund diversified in several sectors of the market.  QQQ is heavily weighted into the tech sector.

Here they are side by side:

QQQ vs VOO Holdings

QQQ vs VOO Top 10 Holdings

The top 10 holdings for QQQ make up 55% of its portfolio while VOO’s top 10 holdings make up 30%.  This means the performance of a few stocks like Apple, Microsoft, and Amazon will have a big impact on the overall performance of QQQ.

 

VOO and QQQ Differences

VOO vs QQQ differs in that VOO 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 VOO and QQQ:

  • Different Number Of Holdings (~508 vs ~100)
  • Level Of Diversification (QQQ is tech weighted)
  • Brokerage (VOO is Vanguard, QQQ is Invesco)
  • Expense Ratio (0.03% vs 0.2%)
  • Performance (QQQ Offers Higher Returns)

 

VOO Profile

  • Fund Inception: 2010
  • Expense Ratio: 0.03%
  • Number Of Stocks: 508
  • Top 10 Holdings: 30%
  • Admiral Fund (VFIAX)

 

Vanguard S&P 500 ETF (VOO) is a very popular ETF that tracks the S&P 500 index.  VOO has over $829.0 billion in fund total net assets. 

The fund invests in technology, healthcare, financials, industrials, and other industries and has a very low expense ratio.

VOO Top 10 Holdings

VOO Top 10 Holdings

Vanguard’s VOO is largely made up of Microsoft, Apple, Alphabet, Amazon, and Tesla but also provides exposure to over 500 other stocks.

VOO Performance

Vanguard’s VOO aims to have the same performance returns as the S&P 500 index.  VOO and the S&P 500 should always overlap.

VOO Performance

VOO (Blue)                S&P 500 (Yellow)

 

No Minimum Investment

VOO and QQQ 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.

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.  This is great for shares of QQQ or VOO due to their high prices per share (~$360 and ~$425).

There are two easy ways to invest in VOO or QQQ commission-free.

  1. Vanguard to invest in VOO
  2. M1 Finance to invest in either VOO or QQQ. (Use this link for $50 when you open a new account)

Both of these options are free.  This is important because fees can lower our returns.

I like M1 Finance as the best option because it gives you the flexibility to purchase VOO, QQQ, and thousands of other stocks.

 

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 mostly technology companies that are high in growth.

QQQ was created in 1999 and currently has an expense ratio of 0.2% which isn’t high but compared to VOO it is 6 times the cost.

To put some perspective on that; here is what a 0.17% fee (difference between VOO 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 $139,000 less in your account due to the fee because of the extra 0.17% expense ratio.

This 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.

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 VOO?

QQQ and VOO are different investments.  VOO 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.

VOO offers stable returns with more diversification and at a lower cost.

QQQ offers the potential for higher returns with more risk/volatility and at a higher cost.

If having a larger basket of stocks helps you sleep at night, then VOO 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 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 VOO, QQQ, and thousands of other stocks/ETFs.

 

Is VOO or QQQ Better for Financial Independence?

Both VOO and QQQ can get you to Financial Independence Retire Early (FIRE).  They both have performed great over the last 10 years and have low expense ratios.

Being part of the FIRE community, we aim for the lowest fees possible and we are big fans of Vanguard.

For those reasons, I prefer VOO over QQQ.

If you are interested in a Vanguard ETF with similar returns to QQQ but at half the price, take a look at VOOG.

 

My Winner: VOO

My winner is VOO based on the lower expense ratio and the fact that I love Vanguard.  VOO offers more diversification, lower fees, and is a Vanguard fund.

Lower fees are a guaranteed way to keep more money in your portfolio!

I would prefer VOO because I’m a big fan of Vanguard and its low fees.  I would also suggest looking into other funds that give you more diversification like VTSAX.

 


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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