The Invesco QQQ Trust (QQQ) and the iShares Russell 2000 ETF (IWM) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and IWM is a iShares Small Blend fund. So, what’s the difference between QQQ and IWM? And which fund is better?
The expense ratio of QQQ is 0.01 percentage points higher than IWM’s (0.2% vs. 0.19%). QQQ also has a higher exposure to the technology sector and a lower standard deviation. Overall, QQQ has provided higher returns than IWM over the past ten years.
In this article, we’ll compare QQQ vs. IWM. We’ll look at holdings and annual returns, as well as at their fund composition and performance. Moreover, I’ll also discuss QQQ’s and IWM’s portfolio growth, risk metrics, and industry exposure and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||iShares Russell 2000 ETF|
|Category||Large Growth||Small 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 Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.
QQQ’s dividend yield is 0.37% lower than that of IWM (0.49% vs. 0.86%). Also, QQQ yielded on average 7.75% more per year over the past decade (21.27% vs. 13.52%). The expense ratio of QQQ is 0.01 percentage points higher than IWM’s (0.2% vs. 0.19%).
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 Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.
IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.
QQQ is 31.25% more exposed to the Technology sector than IWM (45.46% vs 14.21%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 15.76% higher and 6.28% higher respectively (19.55% vs. 3.79% and 17.27% vs. 10.99%). In total, Real Estate, Energy, and Utilities also make up 13.88% less of the fund’s holdings compared to IWM (0.89% vs. 14.77%).
|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%.
|AMC Entertainment Holdings Inc Class A||0.52%|
|Intellia Therapeutics Inc||0.33%|
|BlackRock Cash Funds Treasury SL Agency||0.29%|
|Tenet Healthcare Corp||0.26%|
|Lattice Semiconductor Corp||0.26%|
|Tetra Tech Inc||0.25%|
|EastGroup Properties Inc||0.24%|
|Arrowhead Pharmaceuticals Inc||0.24%|
IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.
Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.
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 2013 was the strongest year for IWM, returning 38.85% on an annual basis. The poorest year for IWM in the last ten years was 2018, with a yield of -11.02%. Most years the iShares Russell 2000 ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 14.66%, 16.39%, and 19.89% 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 IWM, the end total would have been $36,686. This equates to a $26,686 profit over 11 years and a compound annual growth rate (CAGR) of 13.52%.
QQQ’s CAGR is 7.75 percentage points higher than that of IWM and as a result, would have yielded $39,836 more on a $10,000 investment. Thus, QQQ outperformed IWM by 7.75% annually.
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