If you’re researching your options to invest in the US markets, you’ll probably have come across QQQ and SPY.
These ETFs give you exposure to a wide range of stocks from leading companies such as Apple, Microsoft, Amazon and Alphabet Inc., allowing you to diversify your portfolios with ease.
But which should you choose and what are the differences between QQQ and SPY? Let’s explore these US index ETFs and help you make a better investment decision.
Microsoft (12.52%) Apple (12.31%) Amazon (6.11%) NVIDIA (5.19%) Alphabet Class A (3.76%) Alphabet Class C (3.71%) Tesla (3.67%) Meta Platforms (3.55%) Broadcom (2.07%) PepsiCo (1.97%)
Apple (7.06%) Microsoft (6.17%) Amazon (2.61%) NVIDIA (1.96%) Alphabet Class A (1.81%) Berkshire Hathaway (1.64%) Alphabet Class C (1.59%) Tesla (1.53%) Meta Platforms (1.35%) UnitedHealth Group (1.33%)
What is SPY?
Here are some key facts about the SPDR S&P 500 ETF Trust:
Here’s what you need to know about the SPY ETF in a nutshell:
SPY is an exchange-traded fund, which means it trades like a stock on a stock exchange throughout the trading day.
The S&P 500 index is a market-capitalization weighted index that includes 500 large-cap US stocks like Apple, Microsoft, Amazon, and Facebook. While it gives you exposure to the best companies listed in the US, this also means that the performance of SPY is heavily influenced by the performance of large-cap companies.
The S&P 500 index is also often used as a benchmark for other US stock funds and portfolios.
SPY is a popular choice for investors who want exposure to the broad US stock market, as it provides diversified exposure to 500 large-cap companies across a variety of industries.
What is QQQ?
Here are some key facts about the Invesco QQQ Trust:
Symbol: QQQ
Inception Date: 10 March 1999
Expense Ratio: 0.20%
AUM: $167.8B (as of 30 March 2023)
Here’s what you need to know about the QQQ ETF in a nutshell:
QQQ is also a passively managed ETF. It tracks the NASDAQ-100 index instead.
The NASDAQ-100 index is a market-cap weighted index that includes 100 of the largest non-financial companies listed on the NASDAQ stock exchange. This gives it a heavier weighting towards technology and internet-related companies like Apple, Microsoft, Amazon, Facebook, Google, and Tesla.
QQQ is a popular choice for investors who want exposure to the technology sector and other high-growth companies.
However, it’s important to note that the concentration of its holdings in a tech sector can also make the fund more volatile and subject to greater risks.
If you’re considering buying either the SPY and QQQ, here’re 6 key differences you must know in order to select the better ETF that suits your investment goals.
Strategy
While both QQQ and SPY are passively managed funds, they track different underlying indices which could impact your investment outcome.
QQQ
SPY
Underlying Index
NASDAQ-100 Index
S&P 500 Index
The QQQ ETF tracks the Nasdaq 100 index which includes the 100 largest and most actively traded non-finance stocks listed on Nasdaq.
The SPY tracks the broader S&P 500 index that includes the top 500 stocks listed in the US market, by market capitalization.
The former gives you access to popular high growth companies while the latter offers a more diversified exposure to the US markets.
Let’s take a look at their sector diversification for a clearer idea of what you’re really investing into via the QQQ and SPY:
Sector Diversification
As mentioned in the summary table above, QQQ provides exposure to large, high-growth companies in the technology sector. Here’s how QQQ differs from SPY in terms of its sector diversification:
While QQQ and SPY track different underlying indices, there are overlaps in their Top 10 holdings (weightage is accurate at the point of writing):
QQQ
SPY
Apple
12.31%
7.06%
Microsoft
12.52%
6.17%
Amazon
6.11%
2.61%
NVIDIA
5.19%
1.96%
Alphabet Class A
3.76%
1.81%
Alphabet Class C
3.71%
1.59%
Tesla
3.67%
1.53%
Meta Platforms
3.55%
1.35%
UnitedHealth Group
not in top 10
1.33%
Berkshire Hathaway
not in top 10
1.64%
Broadcom
2.07%
not in top 10
PepsiCo
1.97%
not in top 10
The longer tail of the SPY includes companies that could either hold it back from delivering higher returns when the markets are good, but cushion its volatility when the markets are bad.
You’ll need to decide if you are comfortable trading volatility for higher potential returns.
Returns
As mentioned above, the different underlying index could result in varying outcomes for investors of the QQQ and SPY.
Here’s how these two ETFs performed over the past 5 years:
As the saying goes; “historical results does not guarantee future performance”. However, by comparing the historical performance of QQQ vs SPY, you should have a clearer idea of what to expect as an investor.
Here’re their historical returns across different time spans:
1-Year Return
3-Year Return
5-Year Return
10-Year Return
QQQ
-14.8%
13.2%
12.7%
17%
SPY
-7.8%
12%
9.7%
12.1%
Based on the current data, you should be able to detect patterns of higher volatility in QQQ over the shorter term and higher returns over the long term.
Expense Ratio
QQQ
SPY
Expense Ratio
0.2%
0.0945%
QQQ has an annual expense ratio of 0.2% while SPY charges just 0.0945%. This means QQQ’s fees are twice as expensive as SPY’s.
You should compare this against their historical returns and decide if you are comfortable with the differences in fees.
That said, we’re really just picking pennies here because a 0.2% fee is still relatively cheap.
Fund Manager
QQQ is managed by Invesco while SPY is offered by State Street Global Advisors.
Both fund managers have been in the scene for decades with Invesco being founded in 1935 while SSGA was formed in 1978.
QQQ vs SPY – Similarities
Both are passively managed
Both SPY and QQQ are passively managed ETFs which means they merely track their underlying indices instead of trying to beat the market returns.
The advantage of passively managed ETFs is their low fees as managers do not need to actively pick stocks to deliver higher returns. It also keeps your risks low, in line with the indices.
Liquidity
You will want to invest in ETFs which good liquidity to ensure that you can buy and sell your holdings quickly, with lower spreads.
QQQ
SPY
Assets Under Management (AUM)
$167.8B
$363.4B
Average daily volume
$16.75B
$33.77B
Average Spread
0%
0%
Although their magnitudes vary, both SPY and QQQ are highly liquid ETFs.
Is QQQ better than SPY?
If you’re looking purely at performance, QQQ is better than SPY based on historical performance (past 5 years).
However….
choosing between QQQ and SPY boils down to your investment goals, risk tolerance and portfolio strategy.
If you’re looking for an ETF that offers exposure to high growth companies, with a focus on technology and internet-related stocks, then the QQQ that tracks the NASDAQ-100 may be a better option for you.
On the other hand, if you’re looking for diversified, broad-based exposure across the US stock market, you may prefer the SPY over the QQQ since the former tracks the broader S&P 500 index.
Historically, the QQQ has outperformed the SPY in terms of returns. However, you should keep the downsides in mind. Compared to the SPY, QQQ experiences higher volatility due to its concentration in high-growth stocks.
We have also seen the impact that raising interest rates has on this industry recently, hence you should be mentally prepared for more periods of market drawdowns, if you were to invest in QQQ.
Of course, if you wish to push the envelop and grow your money faster, you would do better by picking stocks that can outperform the market. Alvin shares how we pick such stocks to grow the Dr Wealth portfolio at his live webinar,join him at the next session.
choosing between QQQ and SPY boils down to your investment goals, risk tolerance and portfolio strategy. If you're looking for an ETF that offers exposure to high growth companies, with a focus on technology and internet-related stocks, then the QQQ that tracks the NASDAQ-100 may be a better option for you.
SPY - Volatility Comparison. Invesco QQQ (QQQ) has a higher volatility of 5.04% compared to SPDR S&P 500 ETF (SPY) at 3.35%. This indicates that QQQ's price experiences larger fluctuations and is considered to be riskier than SPY based on this measure.
In two articles published last August and October, we recommended speculators stay away from ProShares UltraPro Short QQQ (NASDAQ:SQQQ) because the extremely high levels of bearish sentiment made speculating in SQQQ far too risky.
Remarkably, QQQ has delivered an average annualized return of 17.7% in the past decade, ending in March 2023. Moreover, QQQ has beaten the S&P 500 (SPX) nine out of the last ten years. Further, the ETF has a low expense ratio (cost of managing the ETF) of 0.20%, which makes it an attractive investment.
On the downside, long-term investors in QQQ must deal with sector risk, possible overvaluation, and the absence of small caps. Overall, QQQ can be a good long-term investment as part of a larger portfolio.
For long-term buy-and-hold investors, the QQQ is a good choice to get broad exposure to the Nasdaq-100 Index. This may be used in conjunction with other index ETFs to create a well-diversified portfolio for the long run.
This ETF started trading in 1999, and it's managed by Invesco, a fund giant. This fund is the top-performing large-cap growth fund in terms of total return over the 15 years to Sept. 2022, according to Lipper. Expense ratio: 0.20 percent.
Invesco QQQ Trust quote is equal to 354.500 USD at 2023-06-11. Based on our forecasts, a long-term increase is expected, the "QQQ" fund price prognosis for 2028-05-31 is 515.667 USD. With a 5-year investment, the revenue is expected to be around +45.46%. Your current $100 investment may be up to $145.46 in 2028.
For Invesco QQQ Trust Stock (QQQ) price forecast for 2025, a forecast is offered for each month of 2025 with average QQQ price forecast of $463.18, a high forecast of $465.05, and a low forecast of $325.21. The average QQQ price prediction of 2025 represents a +29.31% increase from the last price of $358.20.
VGT has edged past QQQ with its returns. Moreover, it has a lower expense ratio of 0.10% compared to QQQ's 0.20%. However, both of these ETFs carry a Moderate Buy consensus rating on TipRanks and have an Outperform Smart Score. Thus, both ETFs look like attractive long-term bets.
The third section will help you know the total dividend earned on a 1000$ investment in QQQ over 10 years. By investing 1000$ in QQQ 10 years ago, you would have earned a total dividend of 152$ (until 2023-04-18).
In the last 30 Years, the Invesco QQQ Trust (QQQ) ETF obtained a 13.50% compound annual return, with a 23.92% standard deviation. In 2022, the ETF granted a 0.54% dividend yield.
Is QQQ A Good Investment For Dividend Portfolios? From a pure income perspective, QQQ isn't a good choice for dividend portfolios. The yield is just too low, and even the solid dividend growth rate will not turn QQQ into a meaningful income machine in the foreseeable future.
What Happens If Triple Leveraged ETFs Go to Zero? Leveraged ETF prices tend to decay over time, and triple leverage will tend to decay at a faster rate than 2x leverage. As a result, they can tend toward zero.
The inherent structural problem with leveraged ETFs, especially the triple leveraged ETFs, is they're only designed to be held short-term as they only mirror the single-day performance of the underlying asset. To maintain a consistent leverage ratio (2X or 3X), they're rebalanced nightly.
Bottom Line. Leveraged ETFs decay due to the compounding effect of daily returns, volatility of the market and the cost of leverage. The volatility drag of leveraged ETFs means that losses in the ETF can be magnified over time and they are not suitable for long-term investments.
Limited returns: Since SPY is passively managed, it can only produce the returns of the S&P 500 index, less fees and expenses. However, an actively managed fund or portfolio can potentially outperform the market.
Average annual returns are accurate as of Sept. 30, 2022. Overall, although the differences are small, VOO has historically outperformed SPY over a variety of measurement periods.
If you're a long-term investor, any time is a good time to buy SPY stock. Given how diversified it is, SPY is the ultimate "set it and forget it" stock. Over the long term, the S&P 500 has returned 9.9% a year on average since 1928 including dividends, says IFA.com.
QQQ stock is the fifth most-popular exchange-traded fund in the world, holding more than $160 billion in investors' assets. It tracks the Nasdaq-100 index, which owns the most valuable nonfinancial stocks on the Nasdaq. QQQ is also the largest ETF that tracks a narrower slice of the stock market.
QQQ has a dividend yield of 0.61% and paid $2.17 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 20, 2023.
For ProShares UltraPro Short QQQ Stock (SQQQ) price forecast for 2028, a forecast is offered for each month of 2028 with average SQQQ price forecast of $1.5696, a high forecast of $48.66, and a low forecast of $0.4926.
Stock prices tend to fall in the middle of the month. So a trader might benefit from timing stock buys near a month's midpoint—the 10th to the 15th, for example. The best day to sell stocks would probably be within the five days around the turn of the month.
What is an inverse ETF? An inverse ETF is set up so that its price rises (or falls) when the price of its target asset falls (or rises). This means the ETF performs inversely to the asset it's tracking. For example, an inverse ETF may be based on the S&P 500 index.
QQQM tracks the NASDAQ-100 Index. The QQQM is functionally the same as the QQQ ETF, except it charges a slightly lower management fee offset by lower liquidity. For most investors, it is worthwhile to switch from QQQ to QQQM.
An investment in innovation. Invesco QQQ is an exchange-traded fund (ETF) that tracks the Nasdaq-100® Index and features Apple, Google, Microsoft, and more.
Choosing between QQQ and SPY boils down to your investment goals, risk tolerance and portfolio strategy. If you're looking for an ETF that offers exposure to high growth companies, with a focus on technology and internet-related stocks, then the QQQ that tracks the NASDAQ-100 may be a better option for you.
Heck, SPY may even rally past QQQ, given its exposure to growth sectors like Energy and Infrastructure. At the risk of oversimplifying, QQQ is a better way to invest in tech while SPY is better for investing in the market as a whole.
SPY - Performance Comparison. In the year-to-date period, QQQ achieves a 33.34% return, which is significantly higher than SPY's 12.84% return. Over the past 10 years, QQQ has outperformed SPY with an annualized return of 18.28%, while SPY has yielded a comparatively lower 12.25% annualized return.
Berkshire has a history of outperforming the S&P 500 during recessions, and performing especially well during bear markets, according to data from Bespoke Investment Group. Since 1980, Berkshire shares have beat the broader market over the course of six recessions by a median of 4.41 percentage points.
The State Street SPDR S&P 500 ETF is not only the oldest U.S. listed exchange-traded fund, but it also typically has both the largest assets under management (AUM) and highest trading volume of all ETFs. This alone makes the SPY the mother of all S&P 500 ETFs.
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at. Rather, you should consider the number of different sources of risk you are getting with those ETFs.
The Nasdaq-100 is heavily allocated towards top performing industries such as Technology, Consumer Discretionary, and Health Care, which have helped the Nasdaq-100 outperform the S&P 500 by a wide margin between December 31, 2007 and September 30, 2022.
For Invesco QQQ Trust Stock (QQQ) price forecast for 2025, a forecast is offered for each month of 2025 with average QQQ price forecast of $463.18, a high forecast of $465.05, and a low forecast of $325.21. The average QQQ price prediction of 2025 represents a +30.69% increase from the last price of $354.41.
The nominal return on investment of $100 is $24,462.29, or 24,462.29%. This means by 2023 you would have $24,562.29 in your pocket. However, it's important to take into account the effect of inflation when considering an investment and especially a long-term investment.
Legendary investor Warren Buffet once said that all it takes to make money as an investor is to 'consistently buy an S&P 500 low-cost index fund. ' And academic research tends to agree that the S&P 500 is a good investment in the long term, despite occasional drawdowns.
Introduction: My name is Kerri Lueilwitz, I am a courageous, gentle, quaint, thankful, outstanding, brave, vast person who loves writing and wants to share my knowledge and understanding with you.
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