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QQQ vs VUG: Which Is The Best Growth ETF?

  • Reading time:12 mins read

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

There are no shortages of fund options when 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

Invesco’s QQQ and Vanguard’s VUG have performed similarly over the last year.  However, over 3 years, QQQ has been beating VUG by more than 12%.

Here is how their performance compares:

QQQ vs VUG Performance

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

Similarities between QQQ and VUG:

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

 

VUG and QQQ Differences

QQQ vs VUG primarily differ because VUG holds almost three times as many stocks.  On the other hand, QQQ has roughly 100 stocks making it smaller than 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: 50%
  • Equivalent Admiral Fund (VIGAX)

Vanguard Growth ETF (VUG) is an ETF focused on growth companies.  The price-to-earning (P/E) ratio for VUG is 38.8x which is high.

The fund has $169 billion in total net assets.

 

VUG Performance

Vanguards Growth ETF (VUG) has outperformed the S&P 500 and therefore Vanguard 500 Index Fund ETF (VOO) over the last 10 years:

VUG Performance Chart

VUG (Blue)    S&P 500 (Yellow)

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

 

VUG Holdings

Vanguard’s VUG is largely made up of Apple, Microsoft, Google, Amazon, and Tesla and provides exposure to over 250 stocks.

VUG Top 10 Holdings

The top 10 holdings make up 50% of the portfolio.

This makes VUG less diversified compared to other ETFs such as Vanguard Total Stock Market Index Fund ETF (VTI).

 

No Minimum Investment

QQQ and VUG are exchange-traded funds (ETFs), so there is NO minimum investment.  Investors looking to buy fractional shares can use platforms like M1 Finance (Get $50 When You Use This Link)

Typically, 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 for shares of QQQ or VUG due to their high prices per share (~$360/Share and $315/Share, respectively).

Here is your guide to making sure you get the M1 Finance $50 Bonus.

I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.

Personal Capital Retirement Fee Analyzer

Personal Capital’s free tools allow you to easily find which of your investments has high fees so that you can switch them to low-cost options.  (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)

 

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.

 

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.

 

Which is Better QQQ or VUG?

QQQ and VUG are very similar investments.  However, 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.

I would say both are excellent options for long-term investors for those reasons.

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(Get $50 When You Use This Link)

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).  This is because 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.

FIRE Calculator

Calculate Your FI Number With My Free FIRE Calculator

 

My Winner: VUG

My winner is VUG solely based on the lower expense ratio, and 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.
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