QQQ vs. VWO: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and VWO is a Vanguard Diversified Emerging Mkts fund. So, what’s the difference between QQQ and VWO? And which fund is better?

The expense ratio of QQQ is 0.10 percentage points higher than VWO’s (0.2% vs. 0.1%). QQQ also has a higher exposure to the technology sector and a lower standard deviation. Overall, QQQ has provided higher returns than VWO over the past ten years.

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

Summary

QQQ VWO
Name Invesco QQQ Trust Vanguard FTSE Emerging Markets Index Fund ETF Shares
Category Large Growth Diversified Emerging Mkts
Issuer Invesco Vanguard
AUM 174.51B 117.28B
Avg. Return 21.27% 5.79%
Div. Yield 0.49% 1.98%
Expense Ratio 0.2% 0.1%

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 FTSE Emerging Markets Index Fund ETF Shares (VWO) is a Diversified Emerging Mkts fund that is issued by Vanguard. It currently has 117.28B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 1.98% with an expense ratio of 0.1%.

QQQ’s dividend yield is 1.49% lower than that of VWO (0.49% vs. 1.98%). Also, QQQ yielded on average 15.48% more per year over the past decade (21.27% vs. 5.79%). The expense ratio of QQQ is 0.10 percentage points higher than VWO’s (0.2% vs. 0.1%).

Fund Composition

Industry Exposure

QQQ vs. VWO - Industry Exposure

QQQ VWO
Technology 45.46% 17.06%
Industrials 2.61% 5.95%
Energy 0.0% 5.48%
Communication Services 19.55% 11.41%
Utilities 0.89% 2.55%
Healthcare 7.04% 5.33%
Consumer Defensive 4.68% 5.87%
Real Estate 0.0% 3.13%
Financial Services 2.51% 18.15%
Consumer Cyclical 17.27% 16.1%
Basic Materials 0.0% 8.98%

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 FTSE Emerging Markets Index Fund ETF Shares (VWO) has the most exposure to the Financial Services sector at 18.15%. This is followed by Technology and Consumer Cyclical at 17.06% and 16.1% respectively. Real Estate (3.13%), Healthcare (5.33%), and Energy (5.48%) only make up 13.94% of the fund’s total assets.

VWO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.87%, 5.95%, 8.98%, 11.41%, and 16.1%.

QQQ is 28.40% more exposed to the Technology sector than VWO (45.46% vs 17.06%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 8.14% higher and 1.17% higher respectively (19.55% vs. 11.41% and 17.27% vs. 16.1%). In total, Real Estate, Energy, and Utilities also make up 10.27% less of the fund’s holdings compared to VWO (0.89% vs. 11.16%).

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%.

VWO - Holdings

VWO Holdings Weight
Tencent Holdings Ltd 5.29%
Alibaba Group Holding Ltd Ordinary Shares 4.73%
Taiwan Semiconductor Manufacturing Co Ltd 4.58%
Meituan 1.88%
Taiwan Semiconductor Manufacturing Co Ltd ADR 1.7%
Reliance Industries Ltd Shs Dematerialised 1.06%
Naspers Ltd Class N 1.01%
Vale SA 0.92%
Infosys Ltd 0.91%
China Construction Bank Corp Class H 0.84%

VWO’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Taiwan Semiconductor Manufacturing Co Ltd, Meituan, and Taiwan Semiconductor Manufacturing Co Ltd ADR at 5.29%, 4.73%, 4.58%, 1.88%, and 1.7%.

Reliance Industries Ltd Shs Dematerialised (1.06%), Naspers Ltd Class N (1.01%), and Vale SA (0.92%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the VWO’s holdings at 0.91% and 0.84%.

Performance

Annual Returns

QQQ vs. VWO - Annual Returns

Year QQQ VWO
2020 48.6% 15.32%
2019 39.12% 20.4%
2018 -0.14% -14.57%
2017 32.7% 31.38%
2016 7.01% 11.75%
2015 9.54% -15.35%
2014 19.12% 0.6%
2013 36.6% -5.0%
2012 18.09% 18.84%
2011 3.44% -18.68%
2010 19.89% 18.99%

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 2017 was the strongest year for VWO, returning 31.38% on an annual basis. The poorest year for VWO in the last ten years was 2011, with a yield of -18.68%. Most years the Vanguard FTSE Emerging Markets Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2020, when gains were 0.6%, 11.75%, and 15.32% respectively.

Portfolio Growth

QQQ vs. VWO - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
VWO $10,000 $16,200 5.79%

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 VWO, the end total would have been $16,200. This equates to a $6,200 profit over 11 years and a compound annual growth rate (CAGR) of 5.79%.

QQQ’s CAGR is 15.48 percentage points higher than that of VWO and as a result, would have yielded $60,322 more on a $10,000 investment. Thus, QQQ outperformed VWO by 15.48% annually.


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