The Invesco QQQ Trust (QQQ) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between QQQ and GOVT? And which fund is better?
The expense ratio of QQQ is 0.15 percentage points higher than GOVT’s (0.2% vs. 0.05%). QQQ also has a high exposure to the technology sector while GOVT is mostly comprised of AAA bonds. Overall, QQQ has provided higher returns than GOVT over the past ten years.
In this article, we’ll compare QQQ vs. GOVT. We’ll look at industry exposure and fund composition, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss QQQ’s and GOVT’s risk metrics, holdings, and performance and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||iShares U.S. Treasury Bond ETF|
|Category||Large Growth||Intermediate Government|
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 U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
QQQ’s dividend yield is 0.51% lower than that of GOVT (0.49% vs. 1.0%). Also, QQQ yielded on average 18.60% more per year over the past decade (21.27% vs. 2.67%). The expense ratio of QQQ is 0.15 percentage points higher than GOVT’s (0.2% vs. 0.05%).
|Facebook Inc Class A||4.01%|
|Facebook Inc A||4.01%|
|Alphabet Inc Class C||3.9%|
|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%.
|GOVT Bond Sectors||Weight|
GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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 GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in QQQ would have resulted in a final balance of $52,252. This is a profit of $42,252 over 8 years and amounts to a compound annual growth rate (CAGR) of 21.27%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
QQQ’s CAGR is 18.60 percentage points higher than that of GOVT and as a result, would have yielded $39,955 more on a $10,000 investment. Thus, QQQ outperformed GOVT by 18.60% annually.
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