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EEM vs. TQQQ: What’s The Difference?

The iShares MSCI Emerging Markets ETF (EEM) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between EEM and TQQQ? And which fund is better?

The expense ratio of EEM is 0.27 percentage points lower than TQQQ’s (0.68% vs. 0.95%). EEM also has a higher exposure to the technology sector and a lower standard deviation. Overall, EEM has provided lower returns than TQQQ over the past ten years.

In this article, we’ll compare EEM vs. TQQQ. We’ll look at annual returns and risk metrics, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss EEM’s and TQQQ’s holdings, industry exposure, and performance and examine how these affect their overall returns.

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Summary

EEMTQQQ
NameiShares MSCI Emerging Markets ETFProShares UltraPro QQQ
CategoryDiversified Emerging MktsTrading–Leveraged Equity
IssueriSharesProShares
AUM30.33B12.41B
Avg. Return5.47%61.22%
Div. Yield1.48%0.0%
Expense Ratio0.68%0.95%

The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.

The ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

EEM’s dividend yield is 1.48% higher than that of TQQQ (1.48% vs. 0.0%). Also, EEM yielded on average 55.75% less per year over the past decade (5.47% vs. 61.22%). The expense ratio of EEM is 0.27 percentage points lower than TQQQ’s (0.68% vs. 0.95%).

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Fund Composition

Industry Exposure

EEM vs. TQQQ - Industry Exposure

EEMTQQQ
Technology21.36%0.0%
Industrials4.61%0.0%
Energy5.17%0.0%
Communication Services11.76%0.0%
Utilities1.99%0.0%
Healthcare5.06%0.0%
Consumer Defensive5.45%0.0%
Real Estate1.98%0.0%
Financial Services18.39%0.0%
Consumer Cyclical15.16%0.0%
Basic Materials9.07%0.0%

The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.

EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.

The ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

EEM is 21.36% more exposed to the Technology sector than TQQQ (21.36% vs 0.0%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 18.39% higher and 15.16% higher respectively (18.39% vs. 0.0% and 15.16% vs. 0.0%). In total, Utilities, Industrials, and Healthcare also make up 11.66% more of the fund’s holdings compared to TQQQ (11.66% vs. 0.00%).

Holdings

EEM - Holdings

EEM HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd6.36%
Alibaba Group Holding Ltd Ordinary Shares4.58%
Tencent Holdings Ltd4.41%
Samsung Electronics Co Ltd4.05%
Meituan1.24%
Vale SA1.04%
Naspers Ltd Class N1.04%
Reliance Industries Ltd Shs Dematerialised0.97%
Infosys Ltd0.92%
China Construction Bank Corp Class H0.83%

EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.

Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.

TQQQ - Holdings

TQQQ HoldingsWeight
Nasdaq 100 Index Swap Goldman Sachs International45.11%
Nasdaq 100 Index Swap Societe Generale44.73%
Nasdaq 100 Index Swap Bnp Paribas38.05%
Nasdaq 100 Index Swap Bank Of America Na31.53%
Nasdaq 100 Index Swap Citibank Na31.49%
Nasdaq 100 Index Swap Jp Morgan Securities26.2%
Apple Inc7.49%
Microsoft Corp6.69%
Nasdaq 100 Index Swap Credit Suisse International5.9%
Amazon.com Inc5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

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Risk Analysis

EEMTQQQ
Mean Return0.384.65
R-squared83.583.64
Std. Deviation17.7950.08
Alpha-2.337.29
Beta1.083.37
Sharpe Ratio0.221.1
Treynor Ratio2.2215.65

The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a Alpha of -2.33 and a Sharpe Ratio of 0.22. Its Beta is 1.08 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Treynor Ratio of 2.22 and a R-squared of 83.5.

The ProShares UltraPro QQQ (TQQQ) has a Standard Deviation of 50.08 with a Sharpe Ratio of 1.1 and a Beta of 3.37. Its Treynor Ratio is 15.65 while TQQQ’s R-squared is 83.64. Furthermore, the fund has a Mean Return of 4.65 and a Alpha of 7.29.

EEM’s Mean Return is 4.27 points lower than that of TQQQ and its R-squared is 0.14 points lower. With a Standard Deviation of 17.79, EEM is slightly less volatile than TQQQ. The Alpha and Beta of EEM are 9.62 points lower and 2.29 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

EEM vs. TQQQ - Annual Returns

YearEEMTQQQ
202017.56%109.85%
201917.67%133.93%
2018-14.98%-19.65%
201736.42%118.65%
201610.51%11.04%
2015-15.41%17.41%
2014-2.82%56.82%
2013-3.14%139.98%
201217.32%51.95%
2011-18.87%-7.77%
201015.93%0.0%

EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.

The year 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

EEM vs. TQQQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
EEM$10,000$13,4375.47%
TQQQ$10,000$593,01261.22%

A $10,000 investment in EEM would have resulted in a final balance of $13,437. This is a profit of $3,437 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.47%.

With a $10,000 investment in TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

EEM’s CAGR is 55.75 percentage points lower than that of TQQQ and as a result, would have yielded $579,575 less on a $10,000 investment. Thus, EEM performed worse than TQQQ by 55.75% annually.


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