QQQM vs. VUG: Which is Best For You?
QQQM and VUG are two popular ETFs for investors seeking exposure to growth stocks.
While both offer great growth potential, you must understand the intricate differences in their holdings to effectively determine which is best for you.
QQQM vs. VUG – An Overview
QQQM follows the NASDAQ-100 Index, which brings exposure to the 100 largest non-financial companies listed on the NASDAQ, making it heavily inclined toward tech and consumer discretionary sectors. As such, you’re likely to find prominent names such as Apple, Google, and Amazon in this ETF.
Conversely, VUG is hitched to the CRSP US Large Cap Growth Index. If you are a growth investor, VUG can be your go-to option, swaying more towards growth stocks in contrast to the tech-heavy QQQM. It exposes investors to firms such as Apple, Microsoft, and Facebook, among others, that are expected to grow at an above-average rate compared to other firms in the market.
Expense Ratio: QQQM vs. VUG
Expense ratios can be make-or-break factors for an investor. Fortunately, both QQQM and VUG offer competitive expense ratios.
QQQM carries an expense ratio of 0.15%, which is lower than a lot of ETFs tracking the NASDAQ. For VUG, you’ll be met with an expense ratio of 0.04% — one of the lowest around.
Therefore, cost-conscious investors might be tempted by VUG for the lower operating expenses but shouldn’t be repelled by QQQM’s reasonably low fees as well. QQQM is the lower expense ratio version of the popular QQQ ETF but is much less liquid.
Dividend Yield: QQQM vs. VUG
Another critical point to mull over while considering any investment is its dividend yield.
In the case of our contenders, QQQM flaunts a dividend yield of about 0.5%, while VUG has a similar yield of around 0.6%. Either way, both options give a pretty similar return on the amount invested.
Comparison of Holdings: QQQM vs. VUG
When inspecting the holdings of these two ETFs, you’ll notice both have a significant share in technology, consumer discretionary, and communication services. But there’s a difference, too.
QQQM tracks the Nasdaq-100 and, therefore, holds around 100 companies. VUG holds just over 200 companies.
QQQM leans more towards the tech sector, with roughly a whopping 48% of its total assets parked there.
Meanwhile, despite having a solid share in tech (~40% of its total assets), VUG diversifies more in other sectors like healthcare, consumer services, and industrials.
Performance Comparison: QQQM vs. VUG
The comparison of performance between QQQM and VUG hinges on market conditions. For instance, QQQM might leap ahead during technology sector booms due to its prevalent tech exposure.
QQQM has outperformed over recent years due to its concentration into fewer stocks, but they both have similar returns. Overall, factors like economic events, market sentiment, and sector-specific news can affect the performance of each ETF.
QQQM vs. VUG - Which is Better for You?
Our final verdict, if you’re looking for growth stocks and maintaining low operating expenses appeals to you, VUG could be your stop.
Alternatively, if tech exposure is what you fancy, QQQM can fulfill that.
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Frequently Asked Questions (FAQs)
Is QQQM a long-term Investment?
Yes, QQQM can indeed be considered a long-term investment. It’s structured to track the NASDAQ-100 Index, which encompasses a blend of large and mid-cap U.S.-based companies across various sectors such as technology and consumer discretionary. Given this diversity and the historical performance of these sectors, QQQM can be a viable choice for long-term investing.
Is QQQM better than QQQ?
As evident from their names themselves, QQQM and QQQ trace the same index – the NASDAQ-100; however, there is a slight difference. QQQ has a higher expense ratio compared to QQQM, which might make QQQM more attractive for long-term investors focusing on cost minimization. Regardless, both are backed by reputable indexes and pack significant potential.
Is QQQM a safe investment?
In investing, risk and reward usually share a see-saw. While QQQM can provide a great upside due to its association with leading companies listed on the NASDAQ, it’s also subject to the general market risks or fluctuations inherent in equity investments.
