QQQ vs. XLC: What’s The Difference?

The Invesco QQQ Trust (QQQ) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between QQQ and XLC? And which fund is better?

The expense ratio of QQQ is 0.08 percentage points higher than XLC’s (0.2% vs. 0.12%). QQQ also has a higher exposure to the technology sector and a higher standard deviation. Overall, QQQ has provided lower returns than XLC over the past ten years.

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

Summary

QQQ XLC
Name Invesco QQQ Trust Communication Services Select Sector SPDR Fund
Category Large Growth Communications
Issuer Invesco SPDR State Street Global Advisors
AUM 174.51B 14.09B
Avg. Return 21.27% 29.04%
Div. Yield 0.49% 0.62%
Expense Ratio 0.2% 0.12%

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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

QQQ’s dividend yield is 0.13% lower than that of XLC (0.49% vs. 0.62%). Also, QQQ yielded on average 7.76% less per year over the past decade (21.27% vs. 29.04%). The expense ratio of QQQ is 0.08 percentage points higher than XLC’s (0.2% vs. 0.12%).

Fund Composition

Industry Exposure

QQQ vs. XLC - Industry Exposure

QQQ XLC
Technology 45.46% 0.0%
Industrials 2.61% 0.0%
Energy 0.0% 0.0%
Communication Services 19.55% 100.0%
Utilities 0.89% 0.0%
Healthcare 7.04% 0.0%
Consumer Defensive 4.68% 0.0%
Real Estate 0.0% 0.0%
Financial Services 2.51% 0.0%
Consumer Cyclical 17.27% 0.0%
Basic Materials 0.0% 0.0%

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 Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

QQQ is 45.46% more exposed to the Technology sector than XLC (45.46% vs 0.0%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 80.45% lower and 17.27% higher respectively (19.55% vs. 100.0% and 17.27% vs. 0.0%). In total, Real Estate, Energy, and Utilities also make up 0.89% more of the fund’s holdings compared to XLC (0.89% vs. 0.00%).

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%.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

Performance

Annual Returns

QQQ vs. XLC - Annual Returns

Year QQQ XLC
2020 48.6% 26.85%
2019 39.12% 31.22%
2018 -0.14% 0.0%
2017 32.7% 0.0%
2016 7.01% 0.0%
2015 9.54% 0.0%
2014 19.12% 0.0%
2013 36.6% 0.0%
2012 18.09% 0.0%
2011 3.44% 0.0%
2010 19.89% 0.0%

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 XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

QQQ vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $20,673 21.27%
XLC $10,000 $16,645 29.04%

A $10,000 investment in QQQ would have resulted in a final balance of $20,673. This is a profit of $10,673 over 2 years and amounts to a compound annual growth rate (CAGR) of 21.27%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

QQQ’s CAGR is 7.76 percentage points lower than that of XLC and as a result, would have yielded $4,028 more on a $10,000 investment. Thus, QQQ performed worse than XLC by 7.76% annually.


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