QUAL vs. TQQQ: What’s The Difference?

The iShares MSCI USA Quality Factor ETF (QUAL) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. QUAL is a iShares Large Blend fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between QUAL and TQQQ? And which fund is better?

The expense ratio of QUAL is 0.80 percentage points lower than TQQQ’s (0.15% vs. 0.95%). QUAL also has a higher exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided lower returns than TQQQ over the past 7 years.

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

Summary

QUAL TQQQ
Name iShares MSCI USA Quality Factor ETF ProShares UltraPro QQQ
Category Large Blend Trading–Leveraged Equity
Issuer iShares ProShares
AUM 23.93B 12.41B
Avg. Return 13.42% 61.22%
Div. Yield 1.29% 0.0%
Expense Ratio 0.15% 0.95%

The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

The ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

QUAL’s dividend yield is 1.29% higher than that of TQQQ (1.29% vs. 0.0%). Also, QUAL yielded on average 47.80% less per year over the past decade (13.42% vs. 61.22%). The expense ratio of QUAL is 0.80 percentage points lower than TQQQ’s (0.15% vs. 0.95%).

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Fund Composition

Industry Exposure

QUAL vs. TQQQ - Industry Exposure

QUAL TQQQ
Technology 22.52% 0.0%
Industrials 9.22% 0.0%
Energy 2.24% 0.0%
Communication Services 11.44% 0.0%
Utilities 2.41% 0.0%
Healthcare 13.22% 0.0%
Consumer Defensive 8.57% 0.0%
Real Estate 2.72% 0.0%
Financial Services 15.87% 0.0%
Consumer Cyclical 9.43% 0.0%
Basic Materials 2.35% 0.0%

The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

The ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy 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.

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

QUAL is 22.52% more exposed to the Technology sector than TQQQ (22.52% vs 0.0%). QUAL’s exposure to Financial Services and Healthcare stocks is 15.87% higher and 13.22% higher respectively (15.87% vs. 0.0% and 13.22% vs. 0.0%). In total, Basic Materials, Utilities, and Real Estate also make up 7.48% more of the fund’s holdings compared to TQQQ (7.48% vs. 0.00%).

Holdings

QUAL - Holdings

QUAL Holdings Weight
Facebook Inc Class A 4.77%
Nike Inc Class B 4.05%
Microsoft Corp 3.54%
Apple Inc 3.52%
Johnson & Johnson 2.99%
BlackRock Inc 2.87%
Target Corp 2.8%
Mastercard Inc Class A 2.72%
NVIDIA Corp 2.71%
Alphabet Inc Class A 2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

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Risk Analysis

QUAL TQQQ
Mean Return 0 4.65
R-squared 0 83.64
Std. Deviation 0 50.08
Alpha 0 7.29
Beta 0 3.37
Sharpe Ratio 0 1.1
Treynor Ratio 0 15.65

The iShares MSCI USA Quality Factor ETF (QUAL) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Alpha of 0. Its Beta is 0 while QUAL’s Treynor Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Standard Deviation of 0.

The ProShares UltraPro QQQ (TQQQ) has a Mean Return of 4.65 with a Treynor Ratio of 15.65 and a Beta of 3.37. Its R-squared is 83.64 while TQQQ’s Sharpe Ratio is 1.1. Furthermore, the fund has a Alpha of 7.29 and a Standard Deviation of 50.08.

QUAL’s Mean Return is 4.65 points lower than that of TQQQ and its R-squared is 83.64 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than TQQQ. The Alpha and Beta of QUAL are 7.29 points lower and 3.37 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. TQQQ - Annual Returns

Year QUAL TQQQ
2020 16.96% 109.85%
2019 34.14% 133.93%
2018 -5.77% -19.65%
2017 22.26% 118.65%
2016 9.18% 11.04%
2015 5.56% 17.41%
2014 11.62% 56.82%
2013 0.0% 139.98%
2012 0.0% 51.95%
2011 0.0% -7.77%
2010 0.0% 0.0%

QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% respectively.

The year 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

QUAL vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QUAL $10,000 $23,251 13.42%
TQQQ $10,000 $176,325 61.22%

A $10,000 investment in QUAL would have resulted in a final balance of $23,251. This is a profit of $13,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.42%.

With a $10,000 investment in TQQQ, the end total would have been $176,325. This equates to a $166,325 profit over 7 years and a compound annual growth rate (CAGR) of 61.22%.

QUAL’s CAGR is 47.80 percentage points lower than that of TQQQ and as a result, would have yielded $153,074 less on a $10,000 investment. Thus, QUAL performed worse than TQQQ by 47.80% annually.


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