QQQ vs. EFA: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the iShares MSCI EAFE ETF (EFA) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and EFA is a iShares Foreign Large Blend fund. So, what’s the difference between QQQ and EFA? And which fund is better?

The expense ratio of QQQ is 0.12 percentage points lower than EFA’s (0.2% vs. 0.32%). QQQ also has a higher exposure to the technology sector and a higher standard deviation. Overall, QQQ has provided higher returns than EFA over the past ten years.

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

Summary

QQQ EFA
Name Invesco QQQ Trust iShares MSCI EAFE ETF
Category Large Growth Foreign Large Blend
Issuer Invesco iShares
AUM 174.51B 56.77B
Avg. Return 21.27% 6.47%
Div. Yield 0.49% 2.28%
Expense Ratio 0.2% 0.32%

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 MSCI EAFE ETF (EFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 56.77B total assets under management and has yielded an average annual return of 6.47% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.32%.

QQQ’s dividend yield is 1.79% lower than that of EFA (0.49% vs. 2.28%). Also, QQQ yielded on average 14.80% more per year over the past decade (21.27% vs. 6.47%). The expense ratio of QQQ is 0.12 percentage points lower than EFA’s (0.2% vs. 0.32%).

Fund Composition

Industry Exposure

QQQ vs. EFA - Industry Exposure

QQQ EFA
Technology 45.46% 9.68%
Industrials 2.61% 15.01%
Energy 0.0% 3.51%
Communication Services 19.55% 5.68%
Utilities 0.89% 3.35%
Healthcare 7.04% 12.8%
Consumer Defensive 4.68% 10.56%
Real Estate 0.0% 3.01%
Financial Services 2.51% 16.88%
Consumer Cyclical 17.27% 11.62%
Basic Materials 0.0% 7.91%

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 iShares MSCI EAFE ETF (EFA) has the most exposure to the Financial Services sector at 16.88%. This is followed by Industrials and Healthcare at 15.01% and 12.8% respectively. Utilities (3.35%), Energy (3.51%), and Communication Services (5.68%) only make up 12.54% of the fund’s total assets.

EFA’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.91%, 9.68%, 10.56%, 11.62%, and 12.8%.

QQQ is 35.78% more exposed to the Technology sector than EFA (45.46% vs 9.68%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 13.87% higher and 5.65% higher respectively (19.55% vs. 5.68% and 17.27% vs. 11.62%). In total, Real Estate, Energy, and Utilities also make up 8.98% less of the fund’s holdings compared to EFA (0.89% vs. 9.87%).

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%.

EFA - Holdings

EFA Holdings Weight
Nestle SA 2.11%
ASML Holding NV 1.69%
Roche Holding AG 1.55%
LVMH Moet Hennessy Louis Vuitton SE 1.28%
Novartis AG 1.19%
Toyota Motor Corp 1.09%
AstraZeneca PLC 0.92%
Unilever PLC 0.9%
AIA Group Ltd 0.88%
SAP SE 0.86%

EFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.11%, 1.69%, 1.55%, 1.28%, and 1.19%.

Toyota Motor Corp (1.09%), AstraZeneca PLC (0.92%), and Unilever PLC (0.9%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the EFA’s holdings at 0.88% and 0.86%.

Performance

Annual Returns

QQQ vs. EFA - Annual Returns

Year QQQ EFA
2020 48.6% 7.92%
2019 39.12% 21.94%
2018 -0.14% -13.83%
2017 32.7% 24.94%
2016 7.01% 0.96%
2015 9.54% -0.9%
2014 19.12% -5.04%
2013 36.6% 22.62%
2012 18.09% 17.22%
2011 3.44% -12.18%
2010 19.89% 7.52%

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 2017 was the strongest year for EFA, returning 24.94% on an annual basis. The poorest year for EFA in the last ten years was 2018, with a yield of -13.83%. Most years the iShares MSCI EAFE ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 0.96%, 7.52%, and 7.92% respectively.

Portfolio Growth

QQQ vs. EFA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
EFA $10,000 $18,269 6.47%

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 EFA, the end total would have been $18,269. This equates to a $8,269 profit over 11 years and a compound annual growth rate (CAGR) of 6.47%.

QQQ’s CAGR is 14.80 percentage points higher than that of EFA and as a result, would have yielded $58,253 more on a $10,000 investment. Thus, QQQ outperformed EFA by 14.80% annually.


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