247 Wall St. Key Insights

• QQQ offers higher growth potential but comes with greater risk due to its reliance on tech stocks.
• VOO provides broad market exposure with lower risk and steady growth. 
• Also, read “The Next NVIDIA.”

When it comes to investing in ETFs, two of the most popular options are QQQ and VOO. Both offer exposure to a large swath of the stock market, but they’re for very different types of investors. 

QQQ focuses heavily on tech-driven growth, while VOO provides a diversified approach across all major sectors. We dove into each ETF’s historical performance, top holdings, and expert analysis to understand these differences and help you make an informed choice. 

Below, we’ll explain the differences between QQQ and VOO in terms of fees, risks, and performance so that you can decide which one is right for your portfolio. Let’s get started!

What is QQQ?

The Invesco QQQ Trust (NASDAQ: QQQ) is designed to track the performance of the Nasdaq-100 Index. This index contains the 100 largest (non-financial) companies listed on the Nasdaq stock exchange. While this could technically include everything, QQQ typically leans very heavily toward the tech sector (simply because these tend to be larger companies). 

The fund’s objective is to provide exposure to these companies, which also tend to be high-growth. 

What is VOO?

The Vanguard S&P 500 ETF (NYSE: VOO) tracks the S&P 500 Index, which includes the 500 largest companies in the U.S. across all industries. VOO offers broad exposure across several sectors for this reason, making it a very diversified investment. 

It’s most popular with investors looking for stable, long-term growth and those who want to avoid the over-concentration in a specific industry that some other ETFs have. It’s also one of the ETFs we recommend for those new to investing. 

QQQ vs. VOO: Which Fund Is Right for You?

Fees and Risk

QQQ has a slightly higher expense ratio (0.2%) than VOO’s much lower expense ratio of 0.03%. Therefore, VOO is a more cost-effective choice, especially for long-term investing. 

QQQ has a higher beta at around 1.2, making it more volatile compared to the overall market. This means its dips are lower, and its peaks are higher. QQQ is generally considered riskier, but it is also potentially more rewarding. It depends on your risk tolerance.

VOO’s diversified approach and focus on the 500 largest companies leave it with a Beta very close to 1. Therefore, it tends to move similarly to the overall market. It isn’t going to grow a ton, but it isn’t going to dip as much, either. 

Historical Performance

When comparing the two, QQQ has outperformed VOO over the past decade, thanks to the rapid growth of tech giants. For example, QQQ has surged in the past due to a boom in the technology sector, such as in 2020 and 2021. 

However, VOO’s diversified exposure provides steady growth that may be more consistent over the long term, especially if the stock market decides to turn against technology stocks. 

If you’re looking for higher growth and can handle the volatility, QQQ may be more appealing. However, VOO offers reliable, steady growth that is less risky. Both can be solid investments, but their risk profiles are different. 

Top Holdings

Here are VOO’s top holdings:

• Apple Inc. (NASDAQ: AAPL)
• Microsoft Corporation (NASDAQ: MSFT)
• NVIDIA Corporation (NASDAQ: NVDA)
• Amazon.com, Inc. (NASDAQ: AMZN)
• Meta Platforms, Inc. (NASDAQ: META)
• Alphabet Inc. (NASDAQ: GOOGL)
• Berkshire Hathaway Inc. (NYSE: BRK-B)
• Alphabet Inc. (NASDAQ: GOOG)
• Eli Lilly and Company (NYSE: LLY)
• Broadcom Inc. (NASDAQ: AVGO)

On the other hand, here are QQQ’s top holdings:

• Apple Inc.
• Microsoft Corporation 
• NVIDIA Corporation 
• Broadcom Inc. 
• Amazon.com, Inc. 
• Meta Platforms, Inc. 
• Tesla, Inc. (NASDAQ: TSLA)
• Costco Wholesale Corporation (NASDAQ: COST)
• Alphabet Inc. 
• Alphabet Inc. 

As you can see, these holdings are fairly similar. However, the slight differences lead to significant variances in performance. 

Which EFT Should You Buy?

The decision between QQQ and VOO comes down to your investment goals and risk tolerance. If you’re looking for a stock with higher growth potential, then QQQ may be the better option. However, it comes with volatility, so it works best as a long-term investment. You need to be able to wait out the dips.

VOO provides a safer, more diversified route for long-term growth, making it better for short-term investors or those wanting a safe approach. 

Both ETFs have strong historical performance and long-term potential. 

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