Looking to grow your money through investments? If you’re torn between QQQ and SPY ETFs, you’re not alone. Both of these funds are popular among investors and have been performing well recently, making the decision even tougher.
The Invesco QQQ Trust (QQQ) mirrors the Nasdaq 100 Index, while the SPDR S&P 500 ETF Trust (SPY) gives you exposure to 500 of the largest companies in the U.S., representing almost 75% of the country’s stock market value.
In this article, we’ll break down the key features of each fund, compare their similarities and differences, and offer some recommendations on ETF investing. Let’s dive in.
QQQ is an ETF by Invesco that tracks the NASDAQ 100, an index of the 100 largest non-financial stocks on the NASDAQ exchange. This includes leading tech companies like Tesla, Nvidia, Microsoft, and the FAANG stocks. QQQ is one of Invesco’s most popular ETFs, with over $205 billion in assets and a dividend yield of around 0.45%. It has an expense ratio of 0.2% and consists of 100 stocks, with the top ten holdings making up 52% of the fund. While QQQ can be more volatile than SPY, it has outperformed SPY over the past decade.
On the other hand, SPY is an ETF from State Street Global Advisors Trust Company that tracks the S&P 500 Index. Established in 1993, SPY has over $424 billion in assets. It also includes major tech companies like Google, Microsoft, and Apple, but is more diversified across sectors like consumer goods, finance, and energy. SPY holds 506 stocks, with the top ten making up around 28% of the fund. It has a dividend yield of about 1.2% and a lower expense ratio of 0.09%. SPY’s performance has been boosted recently by strong showings in the financial and energy sectors.
Despite both being ETFs, QQQ and SPY have some key differences. SPY has a lower expense ratio and a higher dividend yield compared to QQQ. QQQ is heavily tech-focused, while SPY is more diversified across various sectors. QQQ holds around 100 stocks, whereas SPY holds about 506, making SPY a more broad-based fund. QQQ’s performance is heavily influenced by a few major tech stocks, whereas SPY’s diversification helps minimize risk.
For example, QQQ’s top ten holdings make up 52% of its portfolio, compared to 28% for SPY. This makes QQQ more concentrated and potentially more volatile. Historically, QQQ has outperformed SPY, but it also comes with higher risk and costs. If you’re looking for higher returns and can handle more volatility, QQQ might be the better choice. However, if you prefer stability and lower costs, SPY could be a better fit.
Invesco also offers QQQM, a cheaper alternative to QQQ with an expense ratio of 0.15%, compared to QQQ’s 0.20%. QQQ is one of the top ETFs globally, with around $177 billion in assets and a dividend yield of 0.45%.
Ultimately, the choice between QQQ and SPY depends on your investment goals. If you prioritize lower costs and risks, SPY might be the way to go. If you’re willing to take on more risk for potentially higher returns, consider QQQ. The most important thing is that you’re taking steps to make your money work for you and secure your financial future. Choose wisely and invest in a way that aligns with your objectives.