The Invesco QQQ Trust (QQQ) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. QQQ is a Invesco Large Growth fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between QQQ and XLY? And which fund is better?
The expense ratio of QQQ is 0.08 percentage points higher than XLY’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 XLY over the past ten years.
In this article, we’ll compare QQQ vs. XLY. We’ll look at annual returns and fund composition, as well as at their risk metrics and holdings. Moreover, I’ll also discuss QQQ’s and XLY’s industry exposure, portfolio growth, and performance and examine how these affect their overall returns.
Summary
| QQQ | XLY | |
| Name | Invesco QQQ Trust | Consumer Discretionary Select Sector SPDR Fund |
| Category | Large Growth | Consumer Cyclical |
| Issuer | Invesco | SPDR State Street Global Advisors |
| AUM | 174.51B | 20.21B |
| Avg. Return | 21.27% | 18.86% |
| Div. Yield | 0.49% | 0.63% |
| 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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.
QQQ’s dividend yield is 0.14% lower than that of XLY (0.49% vs. 0.63%). Also, QQQ yielded on average 2.41% more per year over the past decade (21.27% vs. 18.86%). The expense ratio of QQQ is 0.08 percentage points higher than XLY’s (0.2% vs. 0.12%).
Fund Composition
Industry Exposure
| QQQ | XLY | |
| Technology | 45.46% | 0.57% |
| Industrials | 2.61% | 0.0% |
| Energy | 0.0% | 0.0% |
| Communication Services | 19.55% | 0.0% |
| Utilities | 0.89% | 0.0% |
| Healthcare | 7.04% | 0.0% |
| Consumer Defensive | 4.68% | 5.34% |
| Real Estate | 0.0% | 0.0% |
| Financial Services | 2.51% | 0.0% |
| Consumer Cyclical | 17.27% | 94.1% |
| 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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.
XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.
QQQ is 44.89% more exposed to the Technology sector than XLY (45.46% vs 0.57%). QQQ’s exposure to Communication Services and Consumer Cyclical stocks is 19.55% higher and 76.83% lower respectively (19.55% vs. 0.0% and 17.27% vs. 94.1%). In total, Real Estate, Energy, and Utilities also make up 0.89% more of the fund’s holdings compared to XLY (0.89% vs. 0.00%).
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%.
| XLY Holdings | Weight |
| Amazon.com Inc | 22.9% |
| Tesla Inc | 13.5% |
| The Home Depot Inc | 8.74% |
| McDonald’s Corp | 4.5% |
| Nike Inc B | 4.45% |
| Lowe’s Companies Inc | 3.58% |
| Starbucks Corp | 3.44% |
| Target Corp | 3.12% |
| Booking Holdings Inc | 2.35% |
| TJX Companies Inc | 2.12% |
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
Performance
Annual Returns
| Year | QQQ | XLY |
| 2020 | 48.6% | 29.66% |
| 2019 | 39.12% | 28.43% |
| 2018 | -0.14% | 1.66% |
| 2017 | 32.7% | 22.77% |
| 2016 | 7.01% | 5.87% |
| 2015 | 9.54% | 9.93% |
| 2014 | 19.12% | 9.49% |
| 2013 | 36.6% | 42.74% |
| 2012 | 18.09% | 23.6% |
| 2011 | 3.44% | 5.98% |
| 2010 | 19.89% | 27.36% |
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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| QQQ | $10,000 | $76,522 | 21.27% |
| XLY | $10,000 | $63,066 | 18.86% |
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 XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.
QQQ’s CAGR is 2.41 percentage points higher than that of XLY and as a result, would have yielded $13,456 more on a $10,000 investment. Thus, QQQ outperformed XLY by 2.41% annually.
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