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QQQ vs VUG: Which Is The Best Growth ETF?

  • Reading time:5 mins read

We are going to explore the difference between Invesco QQQ Trust (QQQ) vs Vanguard Growth ETF (VUG).

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 VUG.

QQQ vs VUG Comparison Graphic

 

QQQ vs VUG

The primary difference between QQQ and VUG is the company that offers the exchange-traded fund (ETF).  VUG is offered by Vanguard while QQQ is offered by Invesco.  Another significant difference is the number of stocks in each, with VUG having 287 different companies in the index compared to 100 with QQQ.

VUG:

  • Tracks the CRSP US Large Cap Growth Index
  • Has an expense ratio of 0.04%
  • No minimum initial investment
  • Holds 287 stocks

QQQ:

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

 

QQQ vs VUG Performance

QQQ and VUG have performed similarly over the last year.  However, over 3 years QQQ is beating VUG by more than 12%.

Similarities between QQQ and VUG:

  • Exchange-Traded Funds (ETFs)
  • Similar Performance
  • Focused On Growth Companies
  • Low Expense Ratios

 

Here is how their performance compares:

QQQ vs VUG Performance

As you can see, they perform almost identically over the last year with QQQ only beating VUG by 0.94%.

 

VUG and QQQ Differences

QQQ vs VUG primarily differ in that VUG holds almost three 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 QQQ and VUG:

  • Different Number Of Holdings (~287 vs ~100)
  • Level Of Diversification (Even though both are significantly tech weighted)

 

VUG Profile

  • Fund Inception: 2004
  • Expense Ratio: 0.04%
  • Number Of Stocks: 287
  • Top 10 Holdings: 47%

 

Here are the top 10 holdings for the Vanguard Growth ETF (VUG):

VUG Top 10 Holdings

The fund, as of September 2021 has $169 billion total net assets.

VUG is largely made up of Apple, Microsoft, Google, Amazon, and Facebook and provides exposure to over 250 stocks.  However, with the top 10 holdings making up close to 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 VUG are both exchange-traded funds (ETFs) which means 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 VUG due to their high prices per share (~$360/Share and $315/Share respectively).

 

VUG Historical Returns

Take a look at the historical chart below.  You can see that VUG has outperformed the S&P 500 over the last 10 years.

VUG vs S&P500 Performance

However, be mindful that this does not guarantee the next 10 years will look the same.

 

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 VUG it is 5 times more expensive to own QQQ.

To put some perspective on that; here is what a 0.16% fee (difference between VUG 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 ~$139,000 less in your account due to the fee because of the extra 0.16% 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 VUG?

QQQ and VUG are very similar investments.  VUG offers more diversification since it holds about 3 times as many stocks.  However, this hasn’t made a big difference in their performance over the last 3 years.

For those reasons, I would say both are a great option for long-term investors.  If having a larger basket of stocks helps you sleep at night, then VUG would be a better option.

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 VUG, QQQ, and thousands of other stocks/ETFs.

Here Are More Comparisons of QQQ and VUG:

 

Is VUG or QQQ Better for Financial Independence?

Both VUG or QQQ can get you to Financial Independence Retire Early (FIRE).  They both have a similar return on investment and have low expense ratios.

Being part of the FIRE community I know we aim for the lowest fees possible and we’re a big fan of Vanguard.

 

QQQ vs VUG Winner

My Winner: VUG

My winner is VUG solely based on the lower expense ratio and the fact that I love Vanguard.  Vanguard is a brokerage that is investor-owned.

 

 

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.