QQQ vs. XLE: What’s The Difference?

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

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

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

Summary

QQQ XLE
Name Invesco QQQ Trust Energy Select Sector SPDR Fund
Category Large Growth Equity Energy
Issuer Invesco SPDR State Street Global Advisors
AUM 174.51B 25.55B
Avg. Return 21.27% 1.28%
Div. Yield 0.49% 3.92%
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 Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

QQQ’s dividend yield is 3.43% lower than that of XLE (0.49% vs. 3.92%). Also, QQQ yielded on average 19.99% more per year over the past decade (21.27% vs. 1.28%). The expense ratio of QQQ is 0.08 percentage points higher than XLE’s (0.2% vs. 0.12%).

Fund Composition

Industry Exposure

QQQ vs. XLE - Industry Exposure

QQQ XLE
Technology 45.46% 0.0%
Industrials 2.61% 0.0%
Energy 0.0% 100.0%
Communication Services 19.55% 0.0%
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 Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy 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.

XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, 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 XLE (45.46% vs 0.0%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 19.55% higher and 17.27% higher respectively (19.55% vs. 0.0% and 17.27% vs. 0.0%). In total, Real Estate, Energy, and Utilities also make up 99.11% less of the fund’s holdings compared to XLE (0.89% vs. 100.00%).

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%.

XLE - Holdings

XLE Holdings Weight
Exxon Mobil Corp 23.7%
Chevron Corp 20.03%
ConocoPhillips 4.64%
EOG Resources Inc 4.46%
Schlumberger Ltd 4.43%
Marathon Petroleum Corp 4.17%
Pioneer Natural Resources Co 4.08%
Phillips 66 4.07%
Kinder Morgan Inc Class P 3.85%
Williams Companies Inc 3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

Performance

Annual Returns

QQQ vs. XLE - Annual Returns

Year QQQ XLE
2020 48.6% -32.56%
2019 39.12% 11.87%
2018 -0.14% -18.1%
2017 32.7% -1.01%
2016 7.01% 27.95%
2015 9.54% -21.47%
2014 19.12% -8.61%
2013 36.6% 26.16%
2012 18.09% 5.17%
2011 3.44% 2.98%
2010 19.89% 21.7%

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 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

QQQ vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
XLE $10,000 $9,339 1.28%

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 XLE, the end total would have been $9,339. This equates to a $-661 profit over 11 years and a compound annual growth rate (CAGR) of 1.28%.

QQQ’s CAGR is 19.99 percentage points higher than that of XLE and as a result, would have yielded $67,183 more on a $10,000 investment. Thus, QQQ outperformed XLE by 19.99% annually.


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