The Invesco QQQ Trust (QQQ) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between QQQ and VCIT? And which fund is better?
The expense ratio of QQQ is 0.15 percentage points higher than VCIT’s (0.2% vs. 0.05%). QQQ also has a high exposure to the technology sector while VCIT is mostly comprised of BBB bonds. Overall, QQQ has provided higher returns than VCIT over the past ten years.
In this article, we’ll compare QQQ vs. VCIT. We’ll look at fund composition and performance, as well as at their industry exposure and holdings. Moreover, I’ll also discuss QQQ’s and VCIT’s annual returns, portfolio growth, and risk metrics and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares|
|Category||Large Growth||Corporate Bond|
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 Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.
QQQ’s dividend yield is 1.84% lower than that of VCIT (0.49% vs. 2.33%). Also, QQQ yielded on average 15.43% more per year over the past decade (21.27% vs. 5.84%). The expense ratio of QQQ is 0.15 percentage points higher than VCIT’s (0.2% vs. 0.05%).
|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%.
|VCIT Bond Sectors||Weight|
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.
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 VCIT, returning 13.97% on an annual basis. The poorest year for VCIT in the last ten years was 2013, with a yield of -1.8%. Most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 5.5%, 7.47%, and 7.94% 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 VCIT, the end total would have been $17,439. This equates to a $7,439 profit over 10 years and a compound annual growth rate (CAGR) of 5.84%.
QQQ’s CAGR is 15.43 percentage points higher than that of VCIT and as a result, would have yielded $46,388 more on a $10,000 investment. Thus, QQQ outperformed VCIT by 15.43% annually.
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