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VTI vs QQQ: Which Is The Better ETF?

  • Reading time:5 mins read

We are going to explore the difference between Vanguard Total Stock Market ETF (VTI) vs Invesco QQQ Trust (QQQ).

There is no shortage of options when it comes to investing in Exchange Traded Funds (ETFs).  Choosing between two funds can be difficult, but I will make it easy for you to decide between VTI and QQQ.

VTI vs QQQ Graphic

 

VTI vs QQQ

The primary difference between VTI and QQQ is the company that offers the exchange-traded fund (ETF). 

VTI is offered by Vanguard

QQQ is offered by Invesco

Another significant difference is the number of stocks in each, with VTI having 3535 different companies in the index compared to 100 with QQQ.

VTI:

  • Tracks the performance of the CRSP US Total Market Index
  • Has an expense ratio of 0.03%
  • No minimum initial investment
  • Holds 3535 stocks

QQQ:

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

 

VTI vs QQQ Performance

VTI and QQQ have performed differently over the last 5 years with QQQ beating VTI by more than 8%.

Similarities between QQQ and VTI:

  • Exchange-Traded Funds (ETFs)
  • Low Expense Ratios

 

Here is how their performance compares:

VTI vs QQQ Performance

As you can see, QQQ has significantly outperformed VTI over the years.  However, this doesn’t necessarily mean this trend will continue.

 

VTI and QQQ Differences

VTI vs QQQ primarily differ in that VTI holds 35 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 VTI and QQQ:

  • Different Number Of Holdings (~3535 vs ~100)
  • Expense Ratio (0.2% vs 0.03%)
  • Level Of Diversification (QQQ focuses only on high growth companies)

 

VTI Profile

  • Fund Inception: 2001
  • Expense Ratio: 0.03%
  • Number Of Stocks: 3535
  • Top 10 Holdings: 23.9%
  • Equivalent Admiral Fund (VTSAX)

 

Here are the top 10 holdings for the Vanguard Total Stock Market ETF (VTI):

VTI Top 10 Holdings

The fund, as of September 2021 has $1.3 trillion in total net assets.

VTI is largely made up of Apple, Microsoft, Google, Amazon, and Facebook and provides exposure to over 3000 stocks.  The top 10 holdings of VTI make up 23% of the ETF which makes it much more diversified compared to QQQ with its top 10 holdings making up over 50%.

 

No Minimum Investment

VTI and QQQ 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 VTI due to their high prices per share (~$360/Share and $234/Share respectively).

 

VTI Historical Returns

Take a look at the historical chart below.  You can see that the returns for VTI and the S&P 500 have been nearly identical over the last 10 years.

VTI 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 makes it a low-cost ETF to own, however not as low as VTI (0.03% expense ratio).

To put some perspective on that; here is what a 0.17% fee (difference between VTI 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 0.17% 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 30, 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.

 

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Which is Better VTI or QQQ?

VTI and QQQ are different investments.  VTI offers more diversification since it holds about 35 times as many stocks.  However, this has resulted in a lower performance over the last 10 years.

Even so, I would say both are a great option for long-term investors.  If having a larger basket of stocks and the lowest fees helps you sleep at night, then VTI would be a better option.  If you are looking for a Vanguard ETF that is most similar to QQQ, you can see my comparison of VGT vs QQQ

Lastly, it’s important to consider costs and fees because they can add up 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 VTI, QQQ, and thousands of other stocks/ETFs.

 

Is VTI or QQQ Better for Financial Independence?

Both VTI or QQQ can get you to Financial Independence Retire Early (FIRE).  They both have performed great 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.

 

VTI vs QQQ Winner

 

My Winner: VTI

My winner is VTI for its diversification, lower expense ratio, and the fact that I love Vanguard.  Vanguard is a brokerage that is investor-owned which likely means they will continue to offer low-cost ETFs.

 

 

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.