QQQ vs. SHY: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and SHY is a iShares Short Government fund. So, what’s the difference between QQQ and SHY? And which fund is better?

The expense ratio of QQQ is 0.05 percentage points higher than SHY’s (0.2% vs. 0.15%). QQQ also has a high exposure to the technology sector while SHY is mostly comprised of AAA bonds. Overall, QQQ has provided higher returns than SHY over the past ten years.

In this article, we’ll compare QQQ vs. SHY. We’ll look at portfolio growth and fund composition, as well as at their performance and industry exposure. Moreover, I’ll also discuss QQQ’s and SHY’s annual returns, risk metrics, and holdings and examine how these affect their overall returns.

Summary

QQQ SHY
Name Invesco QQQ Trust iShares 1-3 Year Treasury Bond ETF
Category Large Growth Short Government
Issuer Invesco iShares
AUM 174.51B 19.51B
Avg. Return 21.27% 1.27%
Div. Yield 0.49% 0.46%
Expense Ratio 0.2% 0.15%

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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

QQQ’s dividend yield is 0.03% higher than that of SHY (0.49% vs. 0.46%). Also, QQQ yielded on average 20.00% more per year over the past decade (21.27% vs. 1.27%). The expense ratio of QQQ is 0.05 percentage points higher than SHY’s (0.2% vs. 0.15%).

Fund Composition

Holdings

QQQ - Holdings

QQQ Holdings Weight
Apple Inc 11.0%
Microsoft Corp 9.82%
Amazon.com Inc 8.35%
Facebook Inc Class A 4.01%
Facebook Inc A 4.01%
Alphabet Inc Class C 3.9%
Tesla Inc 3.9%
NVIDIA Corp 3.65%
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%.

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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.

Performance

Annual Returns

QQQ vs. SHY - Annual Returns

Year QQQ SHY
2020 48.6% 3.01%
2019 39.12% 3.42%
2018 -0.14% 1.45%
2017 32.7% 0.27%
2016 7.01% 0.75%
2015 9.54% 0.43%
2014 19.12% 0.48%
2013 36.6% 0.23%
2012 18.09% 0.31%
2011 3.44% 1.43%
2010 19.89% 2.23%

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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

QQQ vs. SHY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
SHY $10,000 $11,486 1.27%

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 SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.

QQQ’s CAGR is 20.00 percentage points higher than that of SHY and as a result, would have yielded $65,036 more on a $10,000 investment. Thus, QQQ outperformed SHY by 20.00% annually.


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