We will explore the difference between Vanguard Information Technology ETF (VGT) vs Invesco QQQ Trust (QQQ).
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 VGT vs QQQ.
VGT vs QQQ
The primary difference between VGT and QQQ is the company that offers the exchange-traded fund (ETF). VGT is offered by Vanguard, while Invesco offers QQQ. Another significant difference is the number of stocks in each, with VGT having 357 different companies in the index compared to 100 with QQQ.
- Tracks the MSCI US IMI Info Technology 25/50 (Benchmark)
- Expense Ratio: 0.10%
- No Minimum Initial Investment
- Holds 357 Stocks
- Tracks the performance of the Nasdaq-100 Index
- Expense Ratio: 0.20%
- No Minimum Initial Investment
- Holds 100 Stocks
VGT vs QQQ Performance
VGT and QQQ have performed differently over the last 5 years, with VGT beating QQQ by more than 2.5%. However, they are very similar in their performance returns over 10 years.
Here is how their performance compares:
As you can see, they have performed almost identically over the last 10 years, with VGT only beating QQQ by 1.63%.
Similarities between QQQ and VGT:
- Exchange-Traded Funds (ETFs)
- Similar Performance Over The Long-Term
- Focused On Growth Companies
- Low Expense Ratios
VGT and QQQ Differences
The main difference between VGT and QQQ is that VGT holds almost three times as many stocks. QQQ holds roughly 100 stocks making it smaller compared to most other ETFs.
By investing in an ETF with more holdings, you are helping diversify your portfolio and minimize risk.
Differences between VGT and QQQ:
- Different Number Of Holdings (357 vs 100)
- Level Of Diversification (Even though both are significantly tech weighted)
- Fund Inception: 2004
- Expense Ratio: 0.10%
- Number Of Stocks: 357
- Top 10 Holdings: 57.1%
Vanguard Information Technology ETF (VGT) is an ETF focused on companies in the information technology sector. The price-to-earning (P/E) ratio for VGT is 34x, which is high.
The fund has $54 billion in total net assets.
VGT was created in 2004 and has an expense ratio of 0.10%.
Vanguard’s VGT has outperformed the Nasdaq over the last 10 years:
VGT (Blue) Nasdaq (Yellow)
However, remember that this does not guarantee that the next 10 years will look the same.
VGT Top 10 Holdings
Vanguard’s VGT comprises Apple, Microsoft, NVIDIA, VISA, and Mastercard and provides exposure to over 300 stocks.
However, with the top 10 holdings making up over 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
VGT and QQQ are exchange-traded funds (ETFs), so there is NO minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance. (Get $100 When You Use This Link To Create An Invest Account and Deposit $5,000 Within 30 Days)
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 idle until you have enough to purchase a total share.
This is especially beneficial when it comes to shares of QQQ or VGT due to their high prices per share (~$360/Share and $415/Share, respectively).
Here is your guide to ensuring you get the M1 Finance $100 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’s free tools allow you to easily find which of your investments has high fees so 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)
- Fund Inception: 1999
- Expense Ratio: 0.20%
- Number Of Stocks: ~100
- Top 10 Holdings: 55.70%
The Invesco QQQ Trust (QQQ) exposes investors to a similar portfolio to the Nasdaq 100 index. The ETF is comprised mostly of 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 VGT, it is double the cost.
To put some perspective on that, here is what a 0.10% fee (difference between VGT 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 yearly over 30 years. You will have roughly $82,000 less in your account due to the fee because of the extra 0.10% expense ratio. This does not include costs to buy and sell your shares.
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 is the fourth-most popular ETF globally, with 103 securities holdings, most of which are top technological companies.
Moving on, here are the top 10 holdings for QQQ:
QQQ is primarily 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 billion in net assets. It has performed well over the last 10 years, but again there is no guarantee the next 10 years will look the same.
Which is Better VGT or QQQ?
VGT and QQQ are very similar investments. VGT offers more diversification since it holds about 3 times as many stocks. However, this hasn’t made a difference in their performance since they have had virtually the same returns over the last 10 years.
For those reasons, I would say both are great options for long-term investors. If having a larger basket of stocks helps you sleep at night, VGT 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 purchasing and selling your shares commission-free is essential.
Again a great way to do this is with M1 Finance. (Get $100 When You Use This Link To Create An Invest Account and Deposit $5,000 Within 30 Days)
You can purchase fractional shares for free, allowing you to buy VGT, QQQ, and thousands of other stocks/ETFs.
Is VGT or QQQ Better for Financial Independence?
VGT and 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 big fans of Vanguard.
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My Winner: VGT
My winner is VGT, solely based on the lower expense ratio and the fact that I love Vanguard. Vanguard is a brokerage that is investor-owned.
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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.