QQQ vs. ARKK: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between QQQ and ARKK? And which fund is better?

The expense ratio of QQQ is 0.55 percentage points lower than ARKK’s (0.2% vs. 0.75%). QQQ also has a higher exposure to the technology sector and a higher standard deviation. Overall, QQQ has provided lower returns than ARKK over the past ten years.

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

Summary

QQQ ARKK
Name Invesco QQQ Trust ARK Innovation ETF
Category Large Growth Mid-Cap Growth
Issuer Invesco ARK ETF Trust
AUM 174.51B 25.52B
Avg. Return 21.27% 55.45%
Div. Yield 0.49% 0.0%
Expense Ratio 0.2% 0.75%

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 ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

QQQ’s dividend yield is 0.49% higher than that of ARKK (0.49% vs. 0.0%). Also, QQQ yielded on average 34.18% less per year over the past decade (21.27% vs. 55.45%). The expense ratio of QQQ is 0.55 percentage points lower than ARKK’s (0.2% vs. 0.75%).

Fund Composition

Industry Exposure

QQQ vs. ARKK - Industry Exposure

QQQ ARKK
Technology 45.46% 30.5%
Industrials 2.61% 2.11%
Energy 0.0% 0.0%
Communication Services 19.55% 25.01%
Utilities 0.89% 0.0%
Healthcare 7.04% 29.47%
Consumer Defensive 4.68% 0.93%
Real Estate 0.0% 0.51%
Financial Services 2.51% 0.04%
Consumer Cyclical 17.27% 11.42%
Basic Materials 0.0% 0.0%

The Invesco QQQ Trust (QQQ) has the most exposure to the Technology sector at 45.46%. This is followed by Communication Services and Consumer Cyclical at 19.55% and 17.27% respectively. Real Estate (0.0%), Energy (0.0%), and Utilities (0.89%) only make up 0.89% of the fund’s total assets.

QQQ’s mid-section with moderate exposure is comprised of Financial Services, Industrials, Consumer Defensive, Healthcare, and Consumer Cyclical stocks at 2.51%, 2.61%, 4.68%, 7.04%, and 17.27%.

The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

QQQ is 14.96% more exposed to the Technology sector than ARKK (45.46% vs 30.5%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 5.46% lower and 5.85% higher respectively (19.55% vs. 25.01% and 17.27% vs. 11.42%). In total, Real Estate, Energy, and Utilities also make up 0.38% more of the fund’s holdings compared to ARKK (0.89% vs. 0.51%).

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%.

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

Performance

Annual Returns

QQQ vs. ARKK - Annual Returns

Year QQQ ARKK
2020 48.6% 152.52%
2019 39.12% 35.73%
2018 -0.14% 3.58%
2017 32.7% 87.38%
2016 7.01% -1.96%
2015 9.54% 3.76%
2014 19.12% 0.0%
2013 36.6% 0.0%
2012 18.09% 0.0%
2011 3.44% 0.0%
2010 19.89% 0.0%

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 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

QQQ vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $29,315 21.27%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in QQQ would have resulted in a final balance of $29,315. This is a profit of $19,315 over 5 years and amounts to a compound annual growth rate (CAGR) of 21.27%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

QQQ’s CAGR is 34.18 percentage points lower than that of ARKK and as a result, would have yielded $35,903 less on a $10,000 investment. Thus, QQQ performed worse than ARKK by 34.18% annually.


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