QQQ vs. TIP: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the iShares TIPS Bond ETF (TIP) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and TIP is a iShares Inflation-Protected Bond fund. So, what’s the difference between QQQ and TIP? And which fund is better?

The expense ratio of QQQ is 0.01 percentage points higher than TIP’s (0.2% vs. 0.19%). QQQ also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, QQQ has provided higher returns than TIP over the past ten years.

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

Summary

QQQ TIP
Name Invesco QQQ Trust iShares TIPS Bond ETF
Category Large Growth Inflation-Protected Bond
Issuer Invesco iShares
AUM 174.51B 28.3B
Avg. Return 21.27% 4.07%
Div. Yield 0.49% 1.87%
Expense Ratio 0.2% 0.19%

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 TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

QQQ’s dividend yield is 1.38% lower than that of TIP (0.49% vs. 1.87%). Also, QQQ yielded on average 17.20% more per year over the past decade (21.27% vs. 4.07%). The expense ratio of QQQ is 0.01 percentage points higher than TIP’s (0.2% vs. 0.19%).

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%.

TIP - Holdings

TIP Bond Sectors Weight
AAA 99.31%
Others 0.69%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 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. TIP - Annual Returns

Year QQQ TIP
2020 48.6% 10.91%
2019 39.12% 8.28%
2018 -0.14% -1.43%
2017 32.7% 2.92%
2016 7.01% 4.56%
2015 9.54% -1.59%
2014 19.12% 3.49%
2013 36.6% -8.65%
2012 18.09% 6.8%
2011 3.44% 13.4%
2010 19.89% 6.1%

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 2011 was the strongest year for TIP, returning 13.4% on an annual basis. The poorest year for TIP in the last ten years was 2013, with a yield of -8.65%. Most years the iShares TIPS Bond ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were 3.49%, 4.56%, and 6.1% respectively.

Portfolio Growth

QQQ vs. TIP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
TIP $10,000 $15,229 4.07%

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 TIP, the end total would have been $15,229. This equates to a $5,229 profit over 11 years and a compound annual growth rate (CAGR) of 4.07%.

QQQ’s CAGR is 17.20 percentage points higher than that of TIP and as a result, would have yielded $61,293 more on a $10,000 investment. Thus, QQQ outperformed TIP by 17.20% annually.


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