The Invesco QQQ Trust (QQQ) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between QQQ and SCHB? And which fund is better?
The expense ratio of QQQ is 0.17 percentage points higher than SCHB’s (0.2% vs. 0.03%). QQQ also has a higher exposure to the technology sector and a higher standard deviation. Overall, QQQ has provided higher returns than SCHB over the past ten years.
In this article, we’ll compare QQQ vs. SCHB. We’ll look at performance and portfolio growth, as well as at their annual returns and fund composition. Moreover, I’ll also discuss QQQ’s and SCHB’s risk metrics, industry exposure, and holdings and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||Schwab U.S. Broad Market ETF|
|Category||Large Growth||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 Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.
QQQ’s dividend yield is 0.90% lower than that of SCHB (0.49% vs. 1.39%). Also, QQQ yielded on average 6.84% more per year over the past decade (21.27% vs. 14.43%). The expense ratio of QQQ is 0.17 percentage points higher than SCHB’s (0.2% vs. 0.03%).
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 Schwab U.S. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.
SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.
QQQ is 21.31% more exposed to the Technology sector than SCHB (45.46% vs 24.15%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 9.03% higher and 5.37% higher respectively (19.55% vs. 10.52% and 17.27% vs. 11.9%). In total, Real Estate, Energy, and Utilities also make up 7.79% less of the fund’s holdings compared to SCHB (0.89% vs. 8.68%).
|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%.
|Facebook Inc A||1.88%|
|Alphabet Inc A||1.66%|
|Alphabet Inc Class C||1.61%|
|Berkshire Hathaway Inc Class B||1.19%|
|JPMorgan Chase & Co||1.06%|
SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.
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 SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in QQQ would have resulted in a final balance of $63,827. This is a profit of $53,827 over 10 years and amounts to a compound annual growth rate (CAGR) of 21.27%.
With a $10,000 investment in SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.
QQQ’s CAGR is 6.84 percentage points higher than that of SCHB and as a result, would have yielded $27,473 more on a $10,000 investment. Thus, QQQ outperformed SCHB by 6.84% annually.
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