The Invesco QQQ Trust (QQQ) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between QQQ and VBK? And which fund is better?
The expense ratio of QQQ is 0.13 percentage points higher than VBK’s (0.2% vs. 0.07%). QQQ also has a higher exposure to the technology sector and a lower standard deviation. Overall, QQQ has provided higher returns than VBK over the past ten years.
In this article, we’ll compare QQQ vs. VBK. We’ll look at holdings and industry exposure, as well as at their fund composition and performance. Moreover, I’ll also discuss QQQ’s and VBK’s annual returns, risk metrics, and portfolio growth and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||Vanguard Small-Cap Growth Index Fund ETF Shares|
|Category||Large Growth||Small Growth|
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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.
QQQ’s dividend yield is 0.04% higher than that of VBK (0.49% vs. 0.45%). Also, QQQ yielded on average 4.74% more per year over the past decade (21.27% vs. 16.53%). The expense ratio of QQQ is 0.13 percentage points higher than VBK’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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.
VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.
QQQ is 17.59% more exposed to the Technology sector than VBK (45.46% vs 27.87%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 16.31% higher and 5.14% higher respectively (19.55% vs. 3.24% and 17.27% vs. 12.13%). In total, Real Estate, Energy, and Utilities also make up 9.07% less of the fund’s holdings compared to VBK (0.89% vs. 9.96%).
|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%.
|Charles River Laboratories International Inc||0.78%|
|Fair Isaac Corp||0.57%|
|Bill.com Holdings Inc Ordinary Shares||0.56%|
VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.
Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.
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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% 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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.
QQQ’s CAGR is 4.74 percentage points higher than that of VBK and as a result, would have yielded $27,883 more on a $10,000 investment. Thus, QQQ outperformed VBK by 4.74% annually.
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