Comparing QQQ vs. VOO ETFs (2024)

BeatMarket

10 min read

Aug 9, 2023

A detailed comparison of QQQ vs VOO is necessary for investors to understand which of these funds best suits their financial goals and strategy. This article explains what each of these ETFs are, analyzing their similarities and differences.

While these funds do not track the same index, they both invest in stocks of major U.S. companies. Their net holdings overlap and their quotes move mostly in the same direction.

Table of Contents

QQQ and VOO are stock tickers for popular ETFs. They have both been traded on US exchanges for a long time, are managed by trustworthy companies and can be considered a good long-term investment.

Exchange traded funds are a collective investment vehicle. A management company sells stocks to investors and invests the money received in securities of multiple issuers. Which companies are included in this set depends on the underlying index.

QQQ and VOO ETFs are traded on the exchange, just like stocks of individual companies. The funds do not set minimum investment requirements. A person with little capital can buy just one stock or even a portion of a stock in case his or her broker provides this service.

To decide which of these ETFs to add to your portfolio, you need to do a detailed analysis of VOO vs QQQ.

QQQ is an exchange-traded fund managed by Invesco. It tracks the Nasdaq-100 index. Basic Information:

name — Invesco QQQ Trust;
expense ratio — 0.2%;
dividend yield over the past 12 months (as of July 2023) — 0.56%;
fund launch date — 10 March 1999
stock price — $382;
current market capitalisation — $212.04B.

The Nasdaq-100 Index combines 100 companies whose stock are traded on the Nasdaq Exchange. The fund’s net assets include 102 securities. Information about the top 10 positions is illustrated in the figure below.

The technology sector leads the net asset composition of the QQQ ETF.

Over the past few years, the Nasdaq-100 index has performed better than the S&P 500. This was due to the rapid growth of the technology sector.

Between July 2013 and July 2023, the value of the Nasdaq-100 has increased about 5 times. That means that an investor who would have invested in a QQQ fund would now have 500% of his or her original capital just from stock price appreciation, excluding dividends paid out over 10 years.

But during certain periods, it is possible to see drawdowns in the stock price of the QQQ ETF. The figure below demonstrates the dynamics of the fund’s quotations over 10 years.

Like almost all US ETFs, QQQ distributes to its shareholders some of the dividends received on its net assets.

Payments are made quarterly. The last dividend at the time of writing came on June 20, 2023.

Key information on dividends QQQ ETF is given in the table below.

ParameterValueAnnual Dividend$2,15Payout Ratio12,13%Dividend Growth15,2%Last dividend cash amount per share$0.50395

The QQQ ETF as an asset for long-term investment has many advantages:

High liquidity. Spread between bids for purchase and sale of this fund’s stocks tends to 0%.
Good profitability on the results of past years. (Although this cannot be a guarantee of future returns).
Moderate expense ratio.

The main drawback of this fund and the Nasdaq-100 is the dominance of the technology sector, which accounts for more than half of net assets. If the industry goes into trouble, QQQ will not bring much profit.

Therefore, the fund is suitable only for those investors who believe that the growth of the capitalization of technology companies will continue in future decades.

It should also be noted that QQQ does not have the greatest degree of diversification. It includes only 100 companies. In the ETF market you can find funds that unite up to 2000 issuers.

VOO is a stock exchange fund managed by The Vanguard Group. It tracks the S&P 500 index. Basic information:

name — Vanguard S&P 500 ETF;
expense ratio — 0.03%;
dividend yield over the past 12 months (as of July 2023) — 1.53%;
fund launch date — 7 September 2010
stock price — $414;
current market capitalisation — $993.09B.

The S&P 500 index includes the 500 largest capitalization companies available on US stock exchanges. VOO’s net assets comprise 505 stocks (as some companies issue securities of several types). The top 10 positions of the fund are shown in the table below.

TickerHoldings% of fundAAPLApple Inc.7.67 %MSFTMicrosoft Corp.6.77 %AMZNAmazon.com Inc.3.11 %NVDANVIDIA Corp.2.80 %GOOGLAlphabet Inc. Class A1.90 %TSLATesla Inc.1.89 %METAFacebook Inc. Class A1.70 %GOOGAlphabet Inc. Class C1.65 %BRK.BBerkshire Hathaway Inc. Class B1.63 %UNHUnitedHealth Group Inc.1.20 %

The dominant sector in the index and fund is Information Technology. It accounts for 28.30% of net assets of VOO ETF.

The technology sector’s stock in the S&P 500 index is 2 times lower than that of Nasdaq-100. And over the past few decades, this sector of the economy has grown most rapidly. Therefore, VOO results are inferior to QQQ. From July 2013 to July 2023, the Fund’s S&P 500 stocks prices rose by a mere 2.77 times. The Fund’s stock price in the United States rose by 1.5 percent.

Below is the price dynamics of the VOO ETF for the last 10 years.

The lower growth rate of the Vanguard S&P 500 ETF stock price is partially offset by a higher dividend yield.

As can be seen from the chart, VOO quotes are also subject to notable drawdowns during crises. Despite the high degree of diversification, this ETF still has a high level of risk.

H3: VOO Dividends

VOO ETF shareholders receive dividends quarterly. The latest cut-off at the time of writing is 29 June 2023.

ParameterValueAnnual Dividend$6.20Payout Ratio29.66%Dividend Growth9.87%Last dividend cash amount per share$1.5762

From a long-term investor’s perspective, the VOO ETF has a number of advantages:

High degree of diversification by issuer.
Smaller share of tech stocks in net assets than in QQQ ETFs.
High liquidity.
One of the lowest expense ratios in the market, even compared to other broad market funds.

The downside of investing in VOO and any other fund tracking the S&P 500 can be considered to be the index’s low returns compared to some other assets. But future results will inevitably be different from the past.

This fund is suitable for people who do not want to bet mainly on one industry, but believe in the growth of the stock market as a whole.

At first glance, QQQ and VOO are completely different assets. The difference between QQQ and VOO comes down to the following points:

the underlying index (Nasdaq-100 and S&P 500);
management company (Invesco and Vanguard);
expense ratio (0.2% vs. 0.03%);
level of diversification (100 companies total vs. 500).

However, a closer look reveals that there are significant similarities between these funds. It is these that make it pointless to add both securities to the portfolio.

The key factor is the composition of net assets. Tech related stocks are heavily weighted in both ETFs, with the same companies topping the list of most important positions.

VOO was created by a company called Vanguard. It owns the largest mutual funds in the US. And in the ETF market, it is the second largest manager in the world. The total value of assets transferred to it in 2022 exceeded $8 trillion.

QQQ is owned by Invesco. The size of this investment company is much smaller: about $1.5 trillion under management. But this is hardly a significant criterion when choosing between QQQ and VOO.

The Nasdaq-100 index, which is tracked by the QQQ fund, contains 5 times fewer companies than the S&P 500, which is copied by VOO. At the same time, it has demonstrated higher returns in previous years.

The picture below shows a VOO vs QQQ chart. It illustrates how the quotes of these funds have changed relative to each other over the last 10 years. The table next to it contains key return indicators.

The image shows that the comparison of QQQ vs VOO performance will be in favor of the former. However, it is also more volatile, i.e. it has sharper ups and downs of quotations.

The reason for this is that about 60% of the fund’s assets consist of only 10 companies (9 of them belong to the technology sector). In VOO ETF, the top 10 largest companies occupy only 30% of the total number of assets.

According to the index tracked in the VOO vs QQQ comparison, the first fund is more diversified. It outperforms the second ETF by 2 parameters:

number of issuers (500 vs. 100);
even distribution of assets by sectors (in QQQ the technology sector accounts for almost ⅔ of net assets, in VOO less than ⅓).

However, both funds invest mainly in stocks of US companies with large capitalisation. The share of even mid-capitalisation issuers in the funds’ net assets is insignificant.

When choosing QQQ vs VOO, an investor should consider that most of the companies in the Nasdaq-100 are growth companies. The S&P 500 index includes value companies along with them.

Another important difference is that the S&P 500 also captures the financial sector, which is completely unrepresented in the Nasdaq Stock Market Index.

The VOO and QQQ portfolio contains matching assets. Of the 100 stocks included in the Nasdaq-100 index, 78 are also included in the S&P 500. First of all, these are companies with a large weight in the index, and therefore with maximum influence on its values. If we compare the top 10 companies by weight in each of the indices, 7 of them will match.

The correlation between stock prices of QQQ and VOO is 0.89. This is considered to be a high indicator.

The expense ratio is the proportion of the net asset value that the fund management company retains to cover its expenses during the year.

According to this indicator, in the comparison of VOO vs QQQ, the undisputed leader will be VOO ETF with an expense ratio of 0.03% versus 0.2% for QQQ. Over an investment horizon of tens of years, even fractions of a per cent can make a meaningful difference in performance. But QQQ’s higher returns in recent years have offset the difference in expense ratios.

In addition, not all ETFs are as cheap to manage as is commonly believed. You can find exchange-traded funds with commissions of 0.5% or more. Against their background, a 0.2% expense ratio cannot be considered significant.

To conclude the QQQ vs VOO comparison, here is a summary table of the key characteristics of both funds.

Parameter/FundInvesco QQQ ETFVanguard VOO ETFIssuerInvesco VanguardBase indexNasdaq-100S&P 500Annualized return for the last 12 months44,11%18,85%Average annual yield over the last 10 years18,88%12,44%Expense ratio 0,2%0,03%Minimum investment thresholdNoNet asset value as of 18.07.2023$200,14B$887,0 B

Both funds have been around for many years and can be considered a good long-term investment. The stocks are highly liquid and the net assets consist of securities of the best US companies.

Investing in VOO is preferable for people who want to increase portfolio diversification across sectors and seek to minimize costs.

In the QQQ vs VOO comparison, it is better for those who believe in the continued dominance of the tech sector and are willing to take risks for the sake of higher potential returns by reducing the degree of diversification.

QQQ is a riskier asset than VOO. The reason for this is that it relies much more on one sector of the economy. Therefore, if tech companies have problems, QQQ quotations will fall more than VOO, which can be supported by issuers from other industries.

Yes. Approximately 76% of the net asset composition of this ETF can be found among the securities included in VOO. That’s why in the QQQ vs VOO comparison it is advisable to choose 1 of the funds rather than adding both to the portfolio.

The main reason for QQQ’s popularity is the past years’ results. Investing in this ETF against the backdrop of the success of technology companies yields higher returns than buying a broad market fund.

Both ETFs, QQQ and VOO, can be considered suitable to add to an investment portfolio. The choice of QQQ vs VOO long term should be made by the investor himself depending on whether he believes that the technology sector will outperform the broad market in the future as well.

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