The Invesco QQQ Trust (QQQ) and the iShares Core MSCI EAFE ETF (IEFA) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and IEFA is a iShares Foreign Large Blend fund. So, what’s the difference between QQQ and IEFA? And which fund is better?
The expense ratio of QQQ is 0.13 percentage points higher than IEFA’s (0.2% vs. 0.07%). QQQ also has a higher exposure to the technology sector and a higher standard deviation. Overall, QQQ has provided higher returns than IEFA over the past ten years.
In this article, we’ll compare QQQ vs. IEFA. We’ll look at industry exposure and fund composition, as well as at their performance and portfolio growth. Moreover, I’ll also discuss QQQ’s and IEFA’s risk metrics, annual returns, and holdings and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||iShares Core MSCI EAFE ETF|
|Category||Large Growth||Foreign Large Blend|
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 MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.07%.
QQQ’s dividend yield is 1.79% lower than that of IEFA (0.49% vs. 2.28%). Also, QQQ yielded on average 15.48% more per year over the past decade (21.27% vs. 5.79%). The expense ratio of QQQ is 0.13 percentage points higher than IEFA’s (0.2% vs. 0.07%).
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 Core MSCI EAFE ETF (IEFA) has the most exposure to the Industrials sector at 16.32%. This is followed by Financial Services and Healthcare at 15.91% and 12.01% respectively. Utilities (3.25%), Real Estate (4.31%), and Communication Services (5.53%) only make up 13.09% of the fund’s total assets.
IEFA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Technology, Consumer Cyclical, and Healthcare stocks at 7.93%, 9.78%, 9.81%, 11.96%, and 12.01%.
QQQ is 35.65% more exposed to the Technology sector than IEFA (45.46% vs 9.81%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 14.02% higher and 5.31% higher respectively (19.55% vs. 5.53% and 17.27% vs. 11.96%). In total, Real Estate, Energy, and Utilities also make up 9.86% less of the fund’s holdings compared to IEFA (0.89% vs. 10.75%).
|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%.
|ASML Holding NV||1.43%|
|Roche Holding AG||1.31%|
|LVMH Moet Hennessy Louis Vuitton SE||1.08%|
|Toyota Motor Corp||0.92%|
|AIA Group Ltd||0.74%|
IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.
Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.
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 IEFA, returning 26.42% on an annual basis. The poorest year for IEFA in the last ten years was 2018, with a yield of -14.2%. Most years the iShares Core MSCI EAFE ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 0.53%, and 1.36% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in QQQ would have resulted in a final balance of $38,251. This is a profit of $28,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 21.27%.
With a $10,000 investment in IEFA, the end total would have been $14,008. This equates to a $4,008 profit over 7 years and a compound annual growth rate (CAGR) of 5.79%.
QQQ’s CAGR is 15.48 percentage points higher than that of IEFA and as a result, would have yielded $24,243 more on a $10,000 investment. Thus, QQQ outperformed IEFA by 15.48% annually.
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