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QQQ vs. XLI: What’s The Difference?

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

The expense ratio of QQQ is 0.08 percentage points higher than XLI’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 XLI over the past ten years.

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

Summary

QQQXLI
NameInvesco QQQ TrustIndustrial Select Sector SPDR Fund
CategoryLarge GrowthIndustrials
IssuerInvescoSPDR State Street Global Advisors
AUM174.51B19.33B
Avg. Return21.27%14.44%
Div. Yield0.49%1.25%
Expense Ratio0.2%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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

QQQ’s dividend yield is 0.76% lower than that of XLI (0.49% vs. 1.25%). Also, QQQ yielded on average 6.83% more per year over the past decade (21.27% vs. 14.44%). The expense ratio of QQQ is 0.08 percentage points higher than XLI’s (0.2% vs. 0.12%).

Fund Composition

Industry Exposure

QQQ vs. XLI - Industry Exposure

QQQXLI
Technology45.46%1.82%
Industrials2.61%97.49%
Energy0.0%0.0%
Communication Services19.55%0.0%
Utilities0.89%0.0%
Healthcare7.04%0.0%
Consumer Defensive4.68%0.0%
Real Estate0.0%0.0%
Financial Services2.51%0.0%
Consumer Cyclical17.27%0.69%
Basic Materials0.0%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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

QQQ is 43.64% more exposed to the Technology sector than XLI (45.46% vs 1.82%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 19.55% higher and 16.58% higher respectively (19.55% vs. 0.0% and 17.27% vs. 0.69%). In total, Real Estate, Energy, and Utilities also make up 0.89% more of the fund’s holdings compared to XLI (0.89% vs. 0.00%).

Holdings

QQQ - Holdings

QQQ HoldingsWeight
Apple Inc11.0%
Microsoft Corp9.82%
Amazon.com Inc8.35%
Facebook Inc Class A4.01%
Facebook Inc A4.01%
Alphabet Inc Class C3.9%
Tesla Inc3.9%
NVIDIA Corp3.65%
Alphabet Inc Class A3.53%
Alphabet Inc A3.53%

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%.

XLI - Holdings

XLI HoldingsWeight
Honeywell International Inc4.9%
United Parcel Service Inc Class B4.84%
Union Pacific Corp4.7%
Boeing Co4.24%
Raytheon Technologies Corp4.16%
Caterpillar Inc3.84%
General Electric Co3.8%
3M Co3.7%
Deere & Co3.54%
Lockheed Martin Corp2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

Performance

Annual Returns

QQQ vs. XLI - Annual Returns

YearQQQXLI
202048.6%11.0%
201939.12%29.11%
2018-0.14%-13.1%
201732.7%23.85%
20167.01%19.93%
20159.54%-4.27%
201419.12%10.44%
201336.6%40.44%
201218.09%14.86%
20113.44%-1.01%
201019.89%27.62%

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 XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

QQQ vs. XLI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
QQQ$10,000$76,52221.27%
XLI$10,000$39,85314.44%

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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

QQQ’s CAGR is 6.83 percentage points higher than that of XLI and as a result, would have yielded $36,669 more on a $10,000 investment. Thus, QQQ outperformed XLI by 6.83% annually.


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