QQQ vs. VXF: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the Vanguard Extended Market Index Fund ETF Shares (VXF) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and VXF is a Vanguard Mid-Cap Growth fund. So, what’s the difference between QQQ and VXF? And which fund is better?

The expense ratio of QQQ is 0.14 percentage points higher than VXF’s (0.2% vs. 0.06%). QQQ also has a higher exposure to the technology sector and a lower standard deviation. Overall, QQQ has provided higher returns than VXF over the past ten years.

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

Summary

QQQ VXF
Name Invesco QQQ Trust Vanguard Extended Market Index Fund ETF Shares
Category Large Growth Mid-Cap Growth
Issuer Invesco Vanguard
AUM 174.51B 114.53B
Avg. Return 21.27% 15.47%
Div. Yield 0.49% 1.19%
Expense Ratio 0.2% 0.06%

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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.

QQQ’s dividend yield is 0.70% lower than that of VXF (0.49% vs. 1.19%). Also, QQQ yielded on average 5.80% more per year over the past decade (21.27% vs. 15.47%). The expense ratio of QQQ is 0.14 percentage points higher than VXF’s (0.2% vs. 0.06%).

Fund Composition

Industry Exposure

QQQ vs. VXF - Industry Exposure

QQQ VXF
Technology 45.46% 23.61%
Industrials 2.61% 11.31%
Energy 0.0% 2.46%
Communication Services 19.55% 7.29%
Utilities 0.89% 1.65%
Healthcare 7.04% 15.25%
Consumer Defensive 4.68% 3.09%
Real Estate 0.0% 8.16%
Financial Services 2.51% 12.56%
Consumer Cyclical 17.27% 11.35%
Basic Materials 0.0% 3.26%

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 Extended Market Index Fund ETF Shares (VXF) has the most exposure to the Technology sector at 23.61%. This is followed by Healthcare and Financial Services at 15.25% and 12.56% respectively. Energy (2.46%), Consumer Defensive (3.09%), and Basic Materials (3.26%) only make up 8.81% of the fund’s total assets.

VXF’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Industrials, Consumer Cyclical, and Financial Services stocks at 7.29%, 8.16%, 11.31%, 11.35%, and 12.56%.

QQQ is 21.85% more exposed to the Technology sector than VXF (45.46% vs 23.61%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 12.26% higher and 5.92% higher respectively (19.55% vs. 7.29% and 17.27% vs. 11.35%). In total, Real Estate, Energy, and Utilities also make up 11.38% less of the fund’s holdings compared to VXF (0.89% vs. 12.27%).

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%.

VXF - Holdings

VXF Holdings Weight
Square Inc A 1.2%
Zoom Video Communications Inc 1.04%
Uber Technologies Inc 0.93%
Moderna Inc 0.9%
Blackstone Group Inc 0.83%
Snap Inc Class A 0.8%
Twilio Inc A 0.73%
DocuSign Inc 0.68%
CrowdStrike Holdings Inc Class A 0.63%
Marvell Technology Inc 0.6%

VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.

Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.

Performance

Annual Returns

QQQ vs. VXF - Annual Returns

Year QQQ VXF
2020 48.6% 32.19%
2019 39.12% 28.04%
2018 -0.14% -9.37%
2017 32.7% 18.1%
2016 7.01% 16.16%
2015 9.54% -3.26%
2014 19.12% 7.55%
2013 36.6% 38.37%
2012 18.09% 18.48%
2011 3.44% -3.61%
2010 19.89% 27.55%

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 VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% respectively.

Portfolio Growth

QQQ vs. VXF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
VXF $10,000 $44,130 15.47%

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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.

QQQ’s CAGR is 5.80 percentage points higher than that of VXF and as a result, would have yielded $32,392 more on a $10,000 investment. Thus, QQQ outperformed VXF by 5.80% annually.


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