QQQ vs. XLV: What’s The Difference?

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

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

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

Summary

QQQ XLV
Name Invesco QQQ Trust Health Care Select Sector SPDR Fund
Category Large Growth Health
Issuer Invesco SPDR State Street Global Advisors
AUM 174.51B 27.88B
Avg. Return 21.27% 15.02%
Div. Yield 0.49% 1.4%
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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

QQQ’s dividend yield is 0.91% lower than that of XLV (0.49% vs. 1.4%). Also, QQQ yielded on average 6.25% more per year over the past decade (21.27% vs. 15.02%). The expense ratio of QQQ is 0.08 percentage points higher than XLV’s (0.2% vs. 0.12%).

Fund Composition

Industry Exposure

QQQ vs. XLV - Industry Exposure

QQQ XLV
Technology 45.46% 0.0%
Industrials 2.61% 0.0%
Energy 0.0% 0.0%
Communication Services 19.55% 0.0%
Utilities 0.89% 0.0%
Healthcare 7.04% 100.0%
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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, 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 XLV (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 0.89% more of the fund’s holdings compared to XLV (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%.

XLV - Holdings

XLV Holdings Weight
Johnson & Johnson 9.19%
UnitedHealth Group Inc 8.01%
Pfizer Inc 4.64%
Abbott Laboratories 4.36%
AbbVie Inc 4.21%
Thermo Fisher Scientific Inc 4.2%
Merck & Co Inc 4.17%
Eli Lilly and Co 3.87%
Danaher Corp 3.61%
Medtronic PLC 3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

Performance

Annual Returns

QQQ vs. XLV - Annual Returns

Year QQQ XLV
2020 48.6% 13.33%
2019 39.12% 20.63%
2018 -0.14% 6.3%
2017 32.7% 21.7%
2016 7.01% -2.83%
2015 9.54% 6.82%
2014 19.12% 25.17%
2013 36.6% 41.24%
2012 18.09% 17.56%
2011 3.44% 12.44%
2010 19.89% 2.91%

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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.

Portfolio Growth

QQQ vs. XLV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QQQ $10,000 $76,522 21.27%
XLV $10,000 $44,147 15.02%

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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.

QQQ’s CAGR is 6.25 percentage points higher than that of XLV and as a result, would have yielded $32,375 more on a $10,000 investment. Thus, QQQ outperformed XLV by 6.25% annually.


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