The Invesco QQQ Trust (QQQ) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and VYM is a Vanguard Large Value fund. So, what’s the difference between QQQ and VYM? And which fund is better?
The expense ratio of QQQ is 0.14 percentage points higher than VYM’s (0.2% vs. 0.06%). QQQ also has a higher exposure to the technology sector and a higher standard deviation. Overall, QQQ has provided higher returns than VYM over the past ten years.
In this article, we’ll compare QQQ vs. VYM. We’ll look at performance and annual returns, as well as at their holdings and fund composition. Moreover, I’ll also discuss QQQ’s and VYM’s risk metrics, industry exposure, and portfolio growth and examine how these affect their overall returns.
|Name||Invesco QQQ Trust||Vanguard High Dividend Yield Index Fund ETF Shares|
|Category||Large Growth||Large Value|
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 High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.
QQQ’s dividend yield is 2.30% lower than that of VYM (0.49% vs. 2.79%). Also, QQQ yielded on average 9.07% more per year over the past decade (21.27% vs. 12.20%). The expense ratio of QQQ is 0.14 percentage points higher than VYM’s (0.2% vs. 0.06%).
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 High Dividend Yield Index Fund ETF Shares (VYM) has the most exposure to the Financial Services sector at 22.05%. This is followed by Consumer Defensive and Healthcare at 14.13% and 13.61% respectively. Basic Materials (4.41%), Consumer Cyclical (5.57%), and Communication Services (5.91%) only make up 15.89% of the fund’s total assets.
VYM’s mid-section with moderate exposure is comprised of Energy, Utilities, Technology, Industrials, and Healthcare stocks at 7.12%, 7.27%, 9.77%, 10.14%, and 13.61%.
QQQ is 35.69% more exposed to the Technology sector than VYM (45.46% vs 9.77%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 13.64% higher and 11.70% higher respectively (19.55% vs. 5.91% and 17.27% vs. 5.57%). In total, Real Estate, Energy, and Utilities also make up 13.52% less of the fund’s holdings compared to VYM (0.89% vs. 14.41%).
|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%.
|JPMorgan Chase & Co||3.53%|
|Johnson & Johnson||3.28%|
|The Home Depot Inc||2.59%|
|Procter & Gamble Co||2.48%|
|Bank of America Corp||2.35%|
|Exxon Mobil Corp||2.02%|
|Comcast Corp Class A||1.96%|
|Verizon Communications Inc||1.75%|
|Cisco Systems Inc||1.69%|
VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.
Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.
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 VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% 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 VYM, the end total would have been $33,914. This equates to a $23,914 profit over 11 years and a compound annual growth rate (CAGR) of 12.20%.
QQQ’s CAGR is 9.07 percentage points higher than that of VYM and as a result, would have yielded $42,608 more on a $10,000 investment. Thus, QQQ outperformed VYM by 9.07% annually.
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