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IVV vs. QQQ – What’s The Difference?

Index funds allow us investors to access broad segments of the market without the hassle of owning each stock individually. Some of the most popular funds are S&P 500 funds such as IVV but also NASDAQ-focused funds like QQQ have gained traction in recent years.

IVV is a large blend ETF whereas QQQ falls into the large growth category. QQQ only holds non-financial securities from the NASDAQ while IVV’s holdings span across the entire market and multiple industries. Over the past decade, QQQ has performed significantly better than IVV with a CAGR of 10.24%.

We’ll not only compare the base metrics between IVV and QQQ but also dive deeper and looks at some of the more subtle differences in risk, performance, and fund composition. With that said, let’s get started!

IVV vs. QQQ – Overview

What’s The Difference?

IVVQQQ
CategoryLarge BlendLarge Growth
IssueriSharesInvesco
AUM294.95B174.51B
YTD Return19.99%17.81%
Div. Yield1.28%0.49%
Expense Ratio0.03%0.20%
Turnover5.00%7.68%

Category

IVV is a Large Blend ETF. The large blend category of funds tends to comprise ETFs that have broad market exposure and don’t focus on one specific industry. As a large blend fund IVV simply holds the entire S&P 500 index including the top 500 US companies weighted by market cap.

QQQ is a Large Growth ETF. Large growth funds such as QQQ typically select one industry sector to focus on and aim to outperform the market by investing heavily in that sector. In the case of QQQ, that sector is technology.

Issuer

IVV is issued by iShares. IVV is issued by one of the biggest asset management companies on the market and backed by BlackRock, the world’s biggest investment firm. iShares has produced some fantastically diverse and low-fee funds among which is IVV.

QQQ is issued by Invesco. While Invesco is not as well known as iShares, they have been steadily working under the radar, creating specialty funds for more enterprising investors. QQQ is one of these funds and has attracted a rather large following for a niche fund.

Assets Under Management

IVV has 294.95B total assets under management. When it comes to assets under management IVV is a behemoth in the ETF world. Nearly 300B USD under management make it the second-largest ETF on the market just behind SPY and before Vanguard’s VTI.

QQQ has 174.51B total assets under management. Compared to IVV, QQQ appears almost small with around 175B dollars under management. However, this number puts QQQ still among the top 5 index funds by market cap.

Year-to-date Return

IVV has a Year-to-date return of 19.99%. Due to the strong US market recovery after the initial COVID-induced crash IVV has had an excellent year of growth and boasts a YTD return of nearly 20%.

QQQ has a Year-to-date return of 17.81%. Perhaps surprisingly, QQQ has not been able to keep up with IVV’s growth rate this year and managed to achieve “just” close to 18%. As we will see later, however, QQQ has outperformed IVV in the previous years by a much bigger margin.

Dividend Yield

IVV has a dividend yield of 1.28%. After this year of fantastic growth, it is to be expected for dividends to be as low as they currently are. If you are looking to invest in dividends IVV does not offer much more than 1% on your money.

QQQ has a dividend yield of 0.49%. Perhaps it is also not surprising that QQQ as a large growth fund distributes even less in dividends to investors. QQQ’s current dividend yield is less than half that of IVV.

Expense Ratio

IVV has an expense ratio of 0.03%. Although Fidelity has managed to provide the market with extremely low-cost funds and has even introduced zero-fee funds the common standard for low-cost index funds is still 0.03%. IVV falls into that category and only charges a negligible yearly fee.

QQQ has an expense ratio of 0.20%. With QQQ, however, your annual fees will be almost seven times those of IVV. This means that for an investment of $10,000 you will end up paying $20 in fees (with IVV this amount would only be $3).

Turnover

IVV has a turnover of 5.00%. With a stable turnover rate of 5% IVV appeals to long-term investors that want a total market exposure and plan to hold the fund for a significant period of time.

QQQ has a turnover of 7.68%. QQQ, on the other hand, has a slightly higher turnover rate than IVV and lends itself to a little more speculation and market betting.

Fund Composition

Now, to the more interesting pie charts: what are these funds made up of? Which securities are they holding and what market sectors are they exposed to? Let’s find out:

The pie chart above represents IVV’s exposure to large-, mid-, and small-cap companies. As you might have guessed this representation is identical to that of the S&P 500 index and the top 500 US companies.

Large-cap companies make up 85% of the fund with mid-cap stocks accounting for the remaining 15%. Small-cap companies are not at all included in the fund. For small-cap exposure check out total market funds such as Vanguard’s VTI.

The cap-size distribution is even more skewed with QQQ: large-cap companies make up 96% of the fund’s total assets and mid-cap stocks barely amount to 5%. As a large growth fund QQQ is not interested in pursuing small-cap companies at all but rather bets on market forces to continue to favor the industry-leading companies.

Industry Exposure

With the advent of broad market ETFs, industry exposure has become much less of a risk factor than it used to be with individual stocks. Now investors of IVV automatically can be exposed to the tech, healthcare, and the financial services sector all with one investment.

Looking at IVV market distribution, we can see that it is still fairly evenly distributed despite the clear dominance of technology stocks in the S&P 500. Although tech companies make up close to one-quarter of IVV’s assets the fund also holds a significant amount of energy, real estate, and consumer copmanies.

The picture for QQQ is much more clear-cut: tech companies – and specifically big tech companies – make up almost half of the fund’s total holdings! The remainder is largely consumed by communication services and consumer cyclical stocks, leaving little room for any other sector.

The bet you’re making with QQQ is obvious: big tech will continue to dominate the US economy and outpace other sectors in performance and long-term growth.

IVV vs. QQQ – Analysis

While other metrics can be subjective at times the bare numbers of risk analysis tend to leave little room for subjective sentiments. Here we can see an overview of various risk factors between IVV and QQQ. I will pay extra attention to their volatility and downside deviation:

MetricIVVQQQ
Arithmetic Mean (monthly)$0.01$0.01
Arithmetic Mean (annualized)9.43%12.93%
Geometric Mean (monthly)0.66%0.82%
Geometric Mean (annualized)8.23%10.24%
Volatility (monthly)4.28%6.31%
Volatility (annualized)14.84%21.85%
Downside Deviation (monthly)2.92%4.29%
Max. Drawdown-50.78%-67.78%
US Market Correlation10.87

Volatility

Unsurprisingly, IVV is less volatile than QQQ. With just under 5% monthly volatility and an annualized volatility of under 15% IVV sports the same metrics as the total US market. QQQ, on the other hand, sees an increase in ups and downs throughout the year and crosses the 20% mark in yearly volatile movements.

Drawdowns

This increased volatility of QQQ is also quite visible when looking at the drawdowns the fund has experienced over the past decades. n the chart above we can clearly see the devastating drawdown of close to 70% in portfolio value in 2003.

Almost for an entire decade after the 2002 market crash QQQ had not been able to recover. IVV tells a different story: distributed risk leads to an overall smoother ride.

IVV vs. QQQ – Performance

Annual Returns

The annual returns for IVV and QQQ highlight perhaps more clearly what the drawdowns already alluded to: IVV has performed much better in the early 2000s while QQQ has gained significant ground in the most recent decade.

In order to determine whether this has been enough to outperform IVV, I have set up a portfolio backtest of $10,000 starting in 2001. And here are the results!

Portfolio Growth

PortfolioInitial BalanceFinal BalanceCAGR
IVV$10,000.00$51,233.008.23%
QQQ$10,000.00$74,973.0010.24%

As we can see quite clearly: QQQ has outperformed IVV over the long term by quite a significant amount. QQQ’s compound annual growth rate is around 2% than that of IVV and the final portfolio balance is more than $13,000 higher.

However, it is also noteworthy that this performance only occurred within the past 3-4 years. Up until that point, IVV and QQQ were performing about the same, with IVV actually providing better returns up until 2016.

Conclusion

If we just knew what the future would hold we would be able to predict which fund will perform better. But sadly, we will just have to go with the data we have for now!

One thing that is obvious after comparing IVV and QQQ in this much detail is that QQQ represents more of a bet on certain industry sectors to outperform the market.

Do you believe that big tech will continue to dominate the US economy or do you fear that regulation and anti-trust laws will come in to break up companies?

IVV is the clear conservative choice, QQQ a market sector bet.


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