FTEC vs. QQQ - Which is Best For You?
This article focuses on the in-depth analysis and comparison between two widely tracked ETFs: FTEC and QQQ.
Let’s pull these funds apart and dissect their constituents so you’ll have the clarity to decide which, if any, is the better fit for your trading and investing needs.
FTEC vs. QQQ: Overview
FTEC holds around 315 companies, while QQQ holds around 100
QQQ has a higher expense ratio than FTEC
FTEC strictly tracks tech, while QQQ tracks every sector except finance
The Fidelity MSCI Information Technology Index ETF (FTEC) runs with a broad mandate of tracking the performance of the MSCI USA IMI Information Technology Index. Simply put, it provides exposure to large, mid, and small-cap US companies in the technology sector. FTEC was launched on October 21, 2013, by Fidelity.
In contrast, the Invesco QQQ ETF (QQQ) is designed to closely mimic the performance of the NASDAQ-100 Index, known for its high concentration in mega technology companies and other sectors like healthcare and consumer discretionary. QQQ was introduced on March 10, 1999, by Invesco - making it a relatively older resident of the ETF universe.
Comparison of Key Characteristics
Strategy and Focus
FTEC, bearing a sole focus on technology, offers concentrated exposure to tech stocks and depends on the tech market’s health. QQQ, however, due to following the NASDAQ-100 Index, presents a slightly diversified plate with a blend of tech and consumer-oriented sectors aiding possible cushion during tech downtrends.
Tracking Index
FTEC aligns itself with the MSCI USA IMI Information Technology Index, housing IT companies of all sizes. On the other hand, QQQ shadows the NASDAQ-100 Index, compiled with 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market.
Performance Analysis
In an extremely bullish tech market, FTEC, with its technology power pack, could potentially outperform QQQ.
However, remember, higher rewards carry higher risk. So, a tech sector whirlwind might hit FTEC harder than QQQ with its non-tech sprinkling.
It’s crucial to merge this knowledge with market trends and conditions, your objectives, and risk comfort to align any investment.
Risk Analysis
As we mentioned earlier, risk and return go hand in hand.
The fact that 100% of FTEC’s portfolio nestles in technology stocks means the fund may oscillate more in accordance with technology market conditions.
QQQ’s risk, although largely impacted by tech health owing to its heavy portfolio presence, is slightly balanced by allocations in sectors like consumer services and industries.
Dividend Comparison
FTEC - 0.50%
QQQ - 0.55%
When it comes to dividends, QQQ offers a 12-month trailing yield of around 0.55%. On the flip side, FTEC sports a slightly lower yield, near 0.50%.
Do note that these numbers fluctuate based on market conditions and the distribution policies of the individual companies in the ETFs.
Expense Ratio Comparison
FTEC - 0.084%
QQQ - 0.20%
In the cost dossier, FTEC charges you an expense ratio - the YMCA that includes management, administrative, and operational expenses - of 0.084%.
Meanwhile, QQQ is pricier, with its expense ratio at 0.20%.
Which ETF is Better for You?
FTEC could potentially lighten up your portfolio if you are seeking concentrated exposure to the tech sector at a lower cost.
However, if a more diversified flavor covering tech plus other sectors at a slightly higher cost fits well with your palate, QQQ might be the preferred option.
These ETFs serve different investment needs and constitute unique opportunities for those hitching a ride on the tech rally or seeking exposure to a broader segment of top-performing Wall Street names.
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Frequently Asked Questions
Let’s first address the burning questions you might have concerning FTEC and QQQ.
What is the Difference between FTEC and QQQ?
FTEC and QQQ display differences in their primary focus. While FTEC tracks the MSCI USA IMI Information Technology Index composed principally of technology companies, QQQ tracks the NASDAQ-100 index that includes the 100 largest non-financial companies listed on the NASDAQ.
Is FTEC a Good ETF?
As with any ETF or investment opportunity, “good” is subjective. FTEC definitely can be a solid investment choice if you seek exposure to the performance and growth potentials of the technology sector. However, always align your investment to your goals, risk tolerance, and investment horizon.
What is the Outlook for FTEC ETF?
The outlook for FTEC depends entirely on market conditions and the technology sector’s performance, which can be volatile due to disruptions and innovation. If the tech sector continues to drive economic growth as seen in recent years, FTEC could potentially fare well.
Are FTEC and VGT the Same?
No, while both ETFs provide exposure to the technology sector, FTEC tracks the MSCI USA IMI Information Technology Index, while VGT tracks the Information Technology Index of the MSCI US Investable Market Index (IMI) that measures sectors’ performance within the US equity universe.
