The Invesco QQQ Trust (QQQ) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between QQQ and HYG? And which fund is better?
The expense ratio of QQQ is 0.28 percentage points lower than HYG’s (0.2% vs. 0.48%). QQQ also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, QQQ has provided higher returns than HYG over the past ten years.
In this article, we’ll compare QQQ vs. HYG. We’ll look at portfolio growth and risk metrics, as well as at their industry exposure and holdings. Moreover, I’ll also discuss QQQ’s and HYG’s performance, annual returns, and fund composition and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||iShares iBoxx $ High Yield Corporate Bond ETF|
|Category||Large Growth||High Yield Bond|
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 iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.
QQQ’s dividend yield is 3.95% lower than that of HYG (0.49% vs. 4.44%). Also, QQQ yielded on average 14.85% more per year over the past decade (21.27% vs. 6.42%). The expense ratio of QQQ is 0.28 percentage points lower than HYG’s (0.2% vs. 0.48%).
|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%.
|HYG Bond Sectors||Weight|
HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (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 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 HYG, the end total would have been $19,427. This equates to a $9,427 profit over 11 years and a compound annual growth rate (CAGR) of 6.42%.
QQQ’s CAGR is 14.85 percentage points higher than that of HYG and as a result, would have yielded $57,095 more on a $10,000 investment. Thus, QQQ outperformed HYG by 14.85% annually.
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