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ETFs offer diversity and a few sense of stability because you don’t should worry about tracking the stock market each day. Two of one of the best ETFs available are QQQ and VOO. Each of those follow a unique index, they usually can help you spend money on a number of the largest firms available on the market.

Each QQQ and VOO are great investment options for people with a long-term investing horizon, but which is best for you? Let’s take a have a look at the differences and similarities between these two popular funds to assist you to make an informed decision to your money.

The Short Version:

• Vanguard offers the VOO ETF, while Invesco offers QQQ. VOO tracks the S&P 500, and QQQ tracks the Nasdaq-100.
• Investing in QQQ is riskier, nevertheless it comes with the potential for higher rewards since this fund invests heavily in tech-related stocks, that are vulnerable to rapid growth during a bull run.
• VOO provides you with easy diversification since this fund invests within the S&P 500, so it has five times as many holdings as QQQ.

What are QQQ and VOO?

QQQ and VOO are the ticker symbols for 2 popular ETFs. Exchange-traded funds or ETFs, are investments that pools securities together and trade as if it was s stock on the exchange. Each of those funds track a particular market cap-weighted index and hold a wide range of investments to present you exposure to a number of the largest firms available on the market. While VOO is a Vanguard index ETF, QQQ is an Invesco ETF that tracks the Nasdaq-100 index.

Investors often trust QQQ and VOO with their funds because these investments provide you with exposure to the stock market without counting on attempting to track individual stocks, which has proven to be extremely dangerous over the previous few years. It’s also possible to purchase VOO because the Admiral Shares mutual fund (VFIAX).

Each of those ETFs have been around for a very long time with long histories of regular growth for investors. The main difference when comparing QQQ vs VOO is the kinds of firms that they spend money on, as QQQ tends to be more teach-heavy, while VOO invests in a wide range of different industries.

An Introduction to QQQ

QQQ tracks the Nasdaq-100, that are the 100 largest non-financial firms. Because of this QQQ is heavily investing in technology. This fund allows investors to place their money into the 100 biggest non-financial firms that trade on the Nasdaq.

• Index it tracks: Nasdaq-100
• Expense ratio: 0.2%
• Last quarterly dividend: $1.97
• Dividend yield: 0.68%

Following the Nasdaq-100, QQQ holds 102 stocks.

Holdings

These are the highest ten holdings of QQQ:

• Apple Inc. (AAPL)
• Microsoft Corp. (MSFT)
• Amazon.com Inc. (AMZN)
• Alphabet Inc Class C (GOOGL)
• Alphabet Inc Class A (GOOG)
• Tesla Inc. (TSLA)
• NVIDIA Corp. (NVDA)
• PepsiCo (PEP)
• Costco Wholesale Corp. (COST)
• Meta Platforms Inc Class A (META)

Sectors

That is how different sectors are weighted inside the QQQ fund.

• Information Technology: 50.19%
• Communication Services: 15.25%
• Consumer Discretionary: 14.27%
• Heath Care: 7.62%
• Consumer Staples: 7.24%
• Industrials: 3.94%
• Utilities: 1.48%
• Not classified: 0.16%

An Introduction to VOO

VOO (VOO.IV) represents the Vanguard S&P 500 ETF because it’s a basket of assorted securities that track the S&P 500 Index. The S&P 500 is a combination of 500 large-cap US firms.

• Index it tracks: S&P 500
• Expense ratio: 0.03%
• Last quarterly dividend: $1.46/share
• Dividend yield: 1.77%

Historically speaking, large-cap firms are safer but don’t provide the identical growth potential that you just would find with smaller firms.

Holdings

• Apple Inc. (AAPL)
• Microsoft Corp. (MSFT)
• Amazon Inc. (AMZN)
• Tesla Inc. (TSLA)
• Alphabet Inc. Class A (GOOGL)
• Berkshire Hathaway Inc. Class B (BRK.B)
• UnitedHealth Group Incorporated (UNH)
• Alphabet Class C (GOOG)
• Exxon Mobil Corporation (XOM)
• Johnson & Johnson (JNJ)

Sectors

That is how different sectors weighted inside the VOO fund. It’s value mentioning again that the weights given listed here are the identical because the S&P 500.

• Basic materials: 2.26%
• Consumer Cyclical: 10.52%
• Financial Services: 13.52%
• Real Estate: 2.72%
• Consumer Defensive: 7.33%
• Healthcare: 15.31%
• Utilities: 2.43%
• Communication Services: 7.31%
• Energy: 5.33%
• Industrials: 8.63%
• Technology: 23.45%

Further Reading: Methods to Put money into the S&P 500 Index

QQQ vs. VOO Performance

Now that we’ve checked out what these funds spend money on, it’s time to see how the ETFs have performed recently and over the previous few years to grasp what to anticipate. Each funds have been in a position to increase in value over time up until the market volatility of 2022. As we’ve all observed, the stock market swings attributable to soaring inflation, persistent rate hikes, and global conflicts have impacted every company.

When comparing the annual returns for each funds, in 2021, VOO returned 28.66% by market price, while QQQ returned 27.24%. Each funds gave investors similar performances as each provided exceptional returns. In 2020, QQQ had a record 12 months with returns of 48.60%, while VOO had returns of 18.35% in the identical 12 months. That 12 months is proof of the overall sentiment that a fund like QQQ will perform higher during a bull run since tech stocks can experience rapid growth when the economy’s booming.

In 2022, the situation is barely different resulting from macroeconomic issues, and each funds have dropped in value. So it wouldn’t matter which fund you selected to speculate in because VOO is down 15.01%, while QQQ has dropped 27.79% (as of December 14th 2022). The QQQ drop has been more significant this 12 months because the fund is heavily invested in tech. It’s value repeating that it’s difficult to search out any ETF that won’t be impacted by the market swings we’ve experienced.

Up to now 10 years, VOO has returned investors a mean of 12.94% after taxes and the sale of fund shares. QQQ has been around since 1999, but when the numbers from the previous decade, the corporate has returned investors a mean of 16.93% after taxes and the sale of fund shares.

QQQ vs. VOO Dividends

Each of those funds pay dividends to investors on a quarterly basis. Many investors will often search for regular income from dividends since you may’t at all times assume that your stocks will offer you regular growth. QQQ has a dividend yield of 0.72% while VOO offers a greater dividend yield of 1.59%. Essentially the most recent dividend payment for QQQ on 09/23/2022 was for $0.51856/share. Essentially the most recent dividend payment for QQQ on 10/03/2022 was for $1.469/share.

QQQ vs. VOO Key Differences and Similarities

There are just a few similarities between the funds. Since VOO essentially tracks the S&P 500 while QQQ tracks the biggest non-financial firms on the Nasdaq, there’s definitely an overlap between QQQ and VOO regarding stocks, as they share about 78 securities.

Since each are ETFs, you should buy them with any brokerage you employ with no minimum investment. Nevertheless, the similarities between QQQ and VOO stop there, as these funds vary resulting from the character of the index that every follows respectively. These are completely different investments.

The highest ten holdings of VOO make up about 26% of the portfolio, while the highest ten holdings for QQQ make up 55% of its portfolio. The consequence of that is that the performance of firms like Apple, Microsoft, and Amazon will hugely impact the performance of the QQQ fund.

Regarding the management expense ratio, QQQ charges 0.2%, while VOO has an expense ratio of 0.03%. Since expenses can add up, it’s essential to look out for funds that reduce the expense ratio, as it is a guaranteed technique to increase returns. With QQQ being six times costlier than VOO, that is something to take into consideration.

The important thing difference when comparing QQQ vs. VOO is that a unique company offers each fund. Vanguard offers the VO, and Invesco offers QQQ. From there, it’s essential to notice that the funds have a considerable difference within the variety of holdings they’ve. VOO holds five times as many stocks as QQQ because the fund tracks the S&P 500,

The stocks within the QQQ fund have a possible for higher growth, but in addition they include the next valuation, which may very well be a problem in today’s market as many firms are proving to be sensitive to the speed hikes which might be impacting consumer spending. There are more inherent risks involved with investing in QQQ because the fund has fewer holdings and it has an emphasis on technology. The QQQ ETF isn’t a broad market fund and is heavily invested in technology.

Since VOO follows the S&P 500, it’s unlikely to beat the market, so you may’t expect above-average returns once you spend money on this fund. Nevertheless, because the fund invests in the largest firms, you will have easy diversification that you just wouldn’t find with QQQ.

You’re prone to experience some volatility when any security in 2022, but there’s barely more risk involved with investing your money in QQQ right away.

Further Reading: 8 Best Vanguard ETFs

The Bottom Line: Which One Makes Sense For You?

How are you going to resolve between these two investment options? As at all times, your investments depend upon your risk tolerance and financial goals.

Nevertheless, generally speaking, most investors who aren’t keen on observing the market closely could be higher off investing within the Vanguard S&P 500 ETF since you may own the general large-cap market, making it easier to remain committed through the ups and downs.

On the flip side, if you happen to’re on the lookout for quicker growth, you’re going to want to speculate within the QQQ because it has historically proven to grow faster if you will have the chance tolerance to handle the market volatility that has been present in 2022.

There’s no easy solution when deciding between VOO and QQQ as each funds are unique. VOO will offer consistent returns with diversification and lower costs. QQQ will give you the chance to usher in higher returns, but these include more risks and the next cost. In case you’re on the lookout for one of the best return possible in your money, then you definately’re going to wish to go along with QQQ. If you would like to be a passive investor and never should stress as much about market fluctuations, then it’s best to spend money on VOO.