Skip to content

IWM vs. TQQQ: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between IWM and TQQQ? And which fund is better?

The expense ratio of IWM is 0.76 percentage points lower than TQQQ’s (0.19% vs. 0.95%). IWM also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, IWM has provided lower returns than TQQQ over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

IWMTQQQ
NameiShares Russell 2000 ETFProShares UltraPro QQQ
CategorySmall BlendTrading–Leveraged Equity
IssueriSharesProShares
AUM66.48B12.41B
Avg. Return13.52%61.22%
Div. Yield0.86%0.0%
Expense Ratio0.19%0.95%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

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%.

IWM’s dividend yield is 0.86% higher than that of TQQQ (0.86% vs. 0.0%). Also, IWM yielded on average 47.70% less per year over the past decade (13.52% vs. 61.22%). The expense ratio of IWM is 0.76 percentage points lower than TQQQ’s (0.19% vs. 0.95%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

IWM vs. TQQQ - Industry Exposure

IWMTQQQ
Technology14.21%0.0%
Industrials14.78%0.0%
Energy3.74%0.0%
Communication Services3.79%0.0%
Utilities2.44%0.0%
Healthcare20.3%0.0%
Consumer Defensive3.65%0.0%
Real Estate8.59%0.0%
Financial Services13.76%0.0%
Consumer Cyclical10.99%0.0%
Basic Materials3.74%0.0%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

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%.

IWM is 20.30% more exposed to the Healthcare sector than TQQQ (20.3% vs 0.0%). IWM’s exposure to Industrials and Technology stocks is 14.78% higher and 14.21% higher respectively (14.78% vs. 0.0% and 14.21% vs. 0.0%). In total, Consumer Defensive, Basic Materials, and Energy also make up 11.13% more of the fund’s holdings compared to TQQQ (11.13% vs. 0.00%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

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%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

IWMTQQQ
Mean Return1.124.65
R-squared77.7383.64
Std. Deviation18.8750.08
Alpha-5.127.29
Beta1.233.37
Sharpe Ratio0.681.1
Treynor Ratio9.5615.65

The iShares Russell 2000 ETF (IWM) has a Standard Deviation of 18.87 with a Mean Return of 1.12 and a Treynor Ratio of 9.56. Its Sharpe Ratio is 0.68 while IWM’s R-squared is 77.73. Furthermore, the fund has a Beta of 1.23 and a Alpha of -5.12.

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

IWM’s Mean Return is 3.53 points lower than that of TQQQ and its R-squared is 5.91 points lower. With a Standard Deviation of 18.87, IWM is slightly less volatile than TQQQ. The Alpha and Beta of IWM are 12.41 points lower and 2.14 points lower than TQQQ’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

IWM vs. TQQQ - Annual Returns

YearIWMTQQQ
202019.89%109.85%
201925.42%133.93%
2018-11.02%-19.65%
201714.66%118.65%
201621.36%11.04%
2015-4.33%17.41%
20144.94%56.82%
201338.85%139.98%
201216.39%51.95%
2011-4.19%-7.77%
201026.76%0.0%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% 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

IWM vs. TQQQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$28,94113.52%
TQQQ$10,000$593,01261.22%

A $10,000 investment in IWM would have resulted in a final balance of $28,941. This is a profit of $18,941 over 10 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

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%.

IWM’s CAGR is 47.70 percentage points lower than that of TQQQ and as a result, would have yielded $564,071 less on a $10,000 investment. Thus, IWM performed worse than TQQQ by 47.70% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply

Your email address will not be published.