QQQ vs. QQQM - NASDAQ 100 Index ETFs from Invesco (2024)

QQQ from Invesco is one of the most popular funds out there. It tracks the NASDAQ 100 Index. QQQM is new on the scene and tracks the same index. What's the deal?

Video

Prefer video? Watch it here:

QQQ vs. QQQM – Index Methodology, Similarities, Differences, Stats, & More

QQQ and QQQM are two funds from Invesco that seek to track the same index: the NASDAQ-100. These are the 100 largest non-financial companies by market cap that trade on the NASDAQ exchange. This index defines itself as companies “on the forefront of innovation.” It is purely large cap growth. As such, it's basically a tech fund at this point due to Big Tech making up such a huge chunk of the market.

First, note that QQQ is structured as a unit investment trust. It is one of the most actively traded funds in the world. It has over $180 billion in assets at this point and an average daily volume of over $12 billion. QQQ launched in 1999. It's grown even more in popularity over the past decade or so due to its market outperformance thanks to the stellar run by Big Tech. It also has a 3x leveraged cousin TQQQ.

If you don't already know, QQQ is not at all a well-diversified fund, and should not replace a broad market index like the as a core holding in a diversified portfolio. Again, it's mostly tech companies; sectors like Utilities, Industrials, and Consumer Staples are all but absent from this fund.

Now let's talk about QQQM. It's an open-ended ETF. It launched in late 2020, over 20 years after its older brother. While it's no slouch in absolute terms, it has a tiny fraction of the assets of QQQ – about $1.25 billion. Since QQQ has all the name recognition, QQQM hasn't attracted the assets that we might expect given its lower fee.

QQQM tracks the same index – the NASDAQ 100. The important differentiator for investors looking to buy and hold this index for the long term is the fee. QQQ has a fee of 0.20%, while QQQM is cheaper at 0.15%. If you're using a tax-advantaged account and you currently own QQQ, switch to QQQM. Period.

Day traders, on the other hand, will appreciate the much greater liquidity and smaller spread of QQQ. Specifically, the average spread on QQQ is $0.01, compared to $0.03 for QQQM.

So why 2 funds for the same index from the same provider?

Invesco's launch of QQQM is a response to the demand from retail investors for lower fees, which has been great for the industry as a whole and can be seen from the likes of Vanguard, Schwab, etc. competing with each other for assets. Why wouldn't Invesco just lower the fee of QQQ from 0.20% to 0.15% and call it a day? In short, the seemingly small difference of 0.05% would account for nearly $100 million in revenue annually for them.

QQQ vs. QQQM – Conclusion

If you're a day trader or you're buying a huge block of shares, use QQQ for the smaller spread and greater liquidity.

If you're a retail investor looking to buy and hold the NASDAQ 100 Index, use QQQM.

Conveniently, both of these funds should be available at any major broker, including M1 Finance, which is the one I'm usually suggesting around here.

Do you hold either of these ETFs in your portfolio? Let me know in the comments.

Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.

Related Posts

• How M1 Finance’s “Smart Transfers” Work
• Stash vs. Robinhood Brokerage Comparison (2024 Review)
• Couch Potato Portfolio Review and ETFs (Scott Burns, 2024)
• 23 Investing Biases and How To Avoid Them