VGT vs. QQQ | Which is the Best Growth ETF?
Discover the differences between VGT vs. QQQ to help you decide which is best for your investment portfolio.
Key Takeaways
VGT and QQQ are both ETFs that track the performance of the technology sector in the U.S. stock market, but they have different compositions and strategies.
VGT tracks the MSCI US Investable Market Information Technology 25/50 Index, which includes large, mid, and small-cap U.S. technology stocks, while QQQ tracks the NASDAQ 100 Index, which includes 100 of the largest non-financial companies listed on the NASDAQ stock exchange.
VGT may be a better option for investors seeking a broader exposure to the technology sector, while QQQ may offer more concentrated exposure to the largest technology companies.
Both funds have relatively low expense ratios and are good long-term investment options.
VGT (Vanguard Growth Tech) vs. QQQ (Nasdaq)
VGT and QQQ are both popular exchange-traded funds (ETFs) that provide investors with exposure to the American stock market. However, there are a few key differences between the two. VGT is focused solely on technology stocks, while QQQ includes stocks from other sectors, such as healthcare and consumer services.
As a result, QQQ may be slightly less volatile than VGT. Additionally, QQQ is market cap weighted, meaning that larger companies have a greater impact on the fund's performance, while VGT is equally weighted, giving smaller companies a more significant role.
QQQ is often referred to as a tech ETF. However, it is only tech-heavy since the largest companies are in the tech sector. If a new industry were to overtake tech stocks in terms of market capitalization, the Nasdaq 100 index would reflect. The only industry not included in the Nasdaq is the financial sector.
Ultimately, the choice between VGT and QQQ will depend on an investor's individual goals and risk tolerance. VGT may be a better fit for those seeking higher potential returns and are willing to accept more volatility, while QQQ could be a good choice for those seeking a more diversified portfolio with less volatility.
VGT Details
Expense Ratio: 0.10%
Dividend Yield: 0.85%
10yr Performance: 18.67%
QQQ Details
Expense Ratio: 0.20%
Dividend Yield: 0.70%
10yr Return: 16.20%
VGT vs. QQQ Historical Performance
Over the past ten years, both VGT and QQQ have delivered strong historical performance, outpacing the broader market. VGT has returned 18.67% over the past decade, while QQQ has returned 16.20%. VGT’s outperformance is primarily because technology has been one of the strongest-performing sectors during this time period.
VGT and QQQ Differences
VGT and QQQ are both exchange-traded funds (ETFs) that invest in American companies, but they have different holdings, fees, and weighting methodologies.
Holdings
VGT is a pure-play technology ETF, meaning it invests only in companies within the technology sector. QQQ, on the other hand, tracks the Nasdaq-100 Index, which includes technology stocks and companies in different sectors such as consumer services, healthcare, and industrials.
Weighting Methodology
VGT is equally weighted, meaning that each stock in the portfolio has an equal weighting. This gives more weight to smaller companies within the index, potentially leading to higher returns and volatility. QQQ, on the other hand, is market cap weighted, meaning that companies with larger market capitalizations have a greater impact on the fund's performance.
Fees
VGT and QQQ have different expense ratios. VGT's expense ratio is 0.10%, which is relatively low for an ETF, while QQQ's expense ratio is slightly higher at 0.20%.
VGT Holdings
The top ten holdings of VGT are all well-known and influential companies in the technology sector. Apple, the largest holding, is one of the most valuable companies in the world and produces a wide range of popular consumer electronics, including iPhones, iPads, and Mac computers.
Microsoft, the second-largest holding, is a leader in the software industry, with popular products like Windows and Office. NVIDIA (NVDA), the third-largest holding, is a leading designer of graphics processing units (GPUs) and artificial intelligence (AI) systems.
Other notable holdings include Visa (V) and Mastercard (MA), two of the largest payment processors in the world. Then there is Broadcom (AVGO), which produces semiconductor solutions for various applications, and Adobe (ADBE), a software company that produces popular design and creative tools.
These companies represent a broad cross-section of the technology industry and will likely continue to be significant players in the sector for the foreseeable future. These holdings will change as the stock market evolves and new tech companies become relevant.
QQQ Holdings
The top ten holdings of QQQ include several well-known technology giants and a few notable companies from other sectors. Microsoft and Apple, the two largest holdings in QQQ, are the same as in VGT.
This mix of technology and consumer goods companies provides a relatively diversified portfolio for investors interested in the technology sector and looking for exposure to other sectors. Again, it's important to remember that the composition of QQQ's holdings may change over time as companies grow, merge, or become less relevant in the industry.
VGT vs. QQQ | Which is Better?
VGT and QQQ are excellent ETFs and provide extremely similar investment returns. Therefore, deciding which is better is mainly subjective and depends on your personal investment goals and ideologies.
If you specifically want to invest in tech companies, VGT is a better investment than QQQ. QQQ includes several other sectors than tech specifically, making it slightly more diversified industry-wise. While the Nasdaq 100 only consists of 100 companies, it contains more sectors than VGT.
What is an ETF?
An exchange-traded fund (ETF) is a type of investment fund that is traded on stock exchanges like individual stocks. ETFs hold a collection of assets, such as stocks, bonds, or commodities, and allow investors to buy and sell shares of the fund on an exchange at market-determined prices.
ETFs offer several advantages over traditional mutual funds, including lower fees, tax efficiency, and greater flexibility. Because ETFs trade on an exchange, investors can buy or sell shares at any time during market hours, unlike mutual funds, which are typically priced only once per day after the market closes.
VGT vs. QQQ | Bottom Line
VGT and QQQ are popular exchange-traded funds that offer investors exposure to the American stock market. While both ETFs have performed well historically, there are key differences between them.
VGT focuses exclusively on the technology sector, while QQQ includes a mix of technology and other sectors. Ultimately, the choice between VGT and QQQ will depend on an investor's individual goals and risk tolerance.
