QQQ vs. AGG: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the iShares Core U.S. Aggregate Bond ETF (AGG) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and AGG is a iShares Intermediate-Term Bond fund. So, what’s the difference between QQQ and AGG? And which fund is better?

The expense ratio of QQQ is 0.16 percentage points higher than AGG’s (0.2% vs. 0.04%). QQQ also has a high exposure to the technology sector while AGG is mostly comprised of AAA bonds. Overall, QQQ has provided higher returns than AGG over the past ten years.

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

Summary

QQQ AGG
Name Invesco QQQ Trust iShares Core U.S. Aggregate Bond ETF
Category Large Growth Intermediate-Term Bond
Issuer Invesco iShares
AUM 174.51B 88.8B
Avg. Return 21.27% 4.04%
Div. Yield 0.49% 1.95%
Expense Ratio 0.2% 0.04%

The Invesco QQQ Trust (QQQ) is a Large Growth fund that is issued by Invesco. It currently has 174.51B total assets under management and has yielded an average annual return of 21.27% over the past 10 years. The fund has a dividend yield of 0.49% with an expense ratio of 0.2%.

The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.

QQQ’s dividend yield is 1.46% lower than that of AGG (0.49% vs. 1.95%). Also, QQQ yielded on average 17.23% more per year over the past decade (21.27% vs. 4.04%). The expense ratio of QQQ is 0.16 percentage points higher than AGG’s (0.2% vs. 0.04%).

Fund Composition

Holdings

QQQ - Holdings

QQQ Holdings Weight
Apple Inc 11.0%
Microsoft Corp 9.82%
Amazon.com Inc 8.35%
Facebook Inc Class A 4.01%
Facebook Inc A 4.01%
Alphabet Inc Class C 3.9%
Tesla Inc 3.9%
NVIDIA Corp 3.65%
Alphabet Inc Class A 3.53%
Alphabet Inc A 3.53%

QQQ’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Facebook Inc A at 11.0%, 9.82%, 8.35%, 4.01%, and 4.01%.

Alphabet Inc Class C (3.9%), Tesla Inc (3.9%), and NVIDIA Corp (3.65%) have a slightly smaller but still significant weight. Alphabet Inc Class A and Alphabet Inc A are also represented in the QQQ’s holdings at 3.53% and 3.53%.

AGG - Holdings

AGG Bond Sectors Weight
AAA 68.92%
BBB 15.38%
A 11.16%
AA 2.92%
Others 1.63%
Below B 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.

Performance

Annual Returns

QQQ vs. AGG - Annual Returns

Year QQQ AGG
2020 48.6% 7.42%
2019 39.12% 8.68%
2018 -0.14% -0.05%
2017 32.7% 3.53%
2016 7.01% 2.56%
2015 9.54% 0.48%
2014 19.12% 6.04%
2013 36.6% -2.15%
2012 18.09% 4.04%
2011 3.44% 7.58%
2010 19.89% 6.3%

QQQ had its best year in 2020 with an annual return of 48.6%. QQQ’s worst year over the past decade yielded -0.14% and occurred in 2018. In most years the Invesco QQQ Trust provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 18.09%, 19.12%, and 19.89% respectively.

The year 2019 was the strongest year for AGG, returning 8.68% on an annual basis. The poorest year for AGG in the last ten years was 2013, with a yield of -2.15%. Most years the iShares Core U.S. Aggregate Bond ETF has given investors modest returns, such as in 2017, 2012, and 2014, when gains were 3.53%, 4.04%, and 6.04% respectively.

Portfolio Growth

QQQ vs. AGG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
AGG $10,000 $15,368 4.04%

A $10,000 investment in QQQ would have resulted in a final balance of $76,522. This is a profit of $66,522 over 11 years and amounts to a compound annual growth rate (CAGR) of 21.27%.

With a $10,000 investment in AGG, the end total would have been $15,368. This equates to a $5,368 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.

QQQ’s CAGR is 17.23 percentage points higher than that of AGG and as a result, would have yielded $61,154 more on a $10,000 investment. Thus, QQQ outperformed AGG by 17.23% annually.


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