In case you’re weighing SPY vs QQQ, you’ve most likely determined to place a few of your cash into an index fund. For many buyers, that’s a sound determination. You’ll get a extremely diversified portfolio even with a small funding, and also you received’t have to fret about assessing and selecting shares.
However which of those funds is best for you? Let’s take a more in-depth look, beginning with the fundamentals.
SPY vs QQQ: By the Numbers
| SPY | QQQ | |
|---|---|---|
| Full Identify | SPDR S&P 500 ETF Belief | Invesco QQQ Belief |
| Index Tracked | S&P 500 | NASDAQ-100 |
| Property Underneath Administration* | $400.4 billion | $154 billion |
| Variety of Holdings | 505 | 102 |
| Expense Ratio | .09% | .20% |
| Dividend Yield* | 1.51% | 0.61% |
| Issuer | State Avenue World Advisors | Invesco |
5-Yr Efficiency
SPY vs QQQ: What’s the Distinction?
Probably the most outstanding distinction between SPY and QQQ is that they monitor completely different indices:
- SPY tracks the S&P 500. The S&P 500 is an index of 503 of the most important corporations within the US. The businesses represented are listed on the New York Inventory Alternate (NYSE), the NASDAQ, and the Chicago Board Choices Alternate (CBOE) BZK Alternate.
- QQQ tracks the NASDAQ-100. The NASDAQ-100 tracks 101 of the most important non-financial shares buying and selling on the NASDAQ change. The NASDAQ is taken into account a tech-heavy change but additionally contains non-financial corporations.
Each of those indices and each ETFs are market cap weighted, which implies that they offer bigger corporations a heavier weighting.
SPY vs QQQ: Sector Publicity
SPY and QQQ break down their sector descriptions in barely completely different phrases.
SPY Sector Breakdown
| Sector | Weight |
|---|---|
| Info Know-how | 27.16% |
| Well being Care | 13.41% |
| Financials | 12.99% |
| Client Discretionary | 10.70% |
| Communication Providers | 8.80% |
| Industrials | 8.28% |
| Client Discretionary | 6.68% |
| Power | 4.59% |
| Utilities | 2.57% |
| Supplies | 2.42% |
| Actual Property | 2.40% |
QQQ Sector Breakdown
| Sector | Weight |
|---|---|
| Know-how | 57.05% |
| Client Discretionary | 18.67% |
| Well being Care | 7.07% |
| Telecommunications | 5.16% |
| Industrials | 4.99% |
| Client Staples | 4.46% |
| Utilities | 1.27% |
| Power | 0.71% |
| Actual Property | 0.3% |
| Primary Supplies | 0.27% |
One factor that instantly stands out in these breakdowns is that QQQ is closely concentrated within the know-how and client discretionary sectors. Each of those sectors are inclined to outperform throughout bull markets however could expertise important drops throughout bear markets.
Monitoring completely different indices is the basic distinction within the SPY vs QQQ equation.
- SPY tracks a bigger variety of corporations from a wider vary of company sectors. Which means it’s extra diversified, has the next dividend (tech corporations typically don’t pay dividends), and might be thought of a extra defensive place, much less prone to lose in down markets.
- QQQ tracks a smaller variety of corporations with a better focus in tech. That makes the ETF extra prone to outperform in expansionary circumstances, when tech tends to outperform, and in addition makes it a better danger in bear markets when high-flying tech corporations have additional to fall.
Neither of those choices is basically higher or worse. They supply publicity to barely completely different sectors of the market, and that results in completely different efficiency traits.
SPY vs QQQ: The Similarities
SPY and QQQ have lots in frequent. SPY is the most important single ETF buying and selling on US markets, and QQQ is the fifth largest. They rank as the primary and second-most traded funds within the nation by common every day quantity.
Each funds are managed by giant funding corporations with intensive monitor information: SPY by State Avenue World Advisors and QQQ by Invesco. In case you’re searching for giant, extremely liquid funds with credible administration, each of those ETFs will cross your display screen.
There are additionally much less apparent similarities, stemming from three primary information:
- Many corporations that commerce on the NASDAQ are a part of the S&P 500.
- Main tech corporations from the NASDAQ are among the many largest corporations within the US.
- Each the S&P 500 and the NASDAQ-100 – and the funds that monitor them – are weighted by market cap.
What does that imply in observe? Let’s have a look at the ten largest holdings of SPY and QQQ.
Prime Holdings: SPY vs QQQ
| SPY | QQQ |
|---|---|
| Apple Inc (7.1%) | Apple Inc (11.04%) |
| Microsoft Corp (6.51%) | Microsoft Corp (9.51%) |
| Amazon.com Inc (3.24%) | Amazon.com Inc (5.38%) |
| NVIDIA Corp (2.84%) | NVIDIA Corp (4.15%) |
| Alphabet Inc Class A (2.14%) | Meta Platforms Inc Class A (3.76%) |
| Tesla Inc (1.87%) | Tesla Inc (3.14%) |
| Meta Platforms Inc Class A (1.84%) | Alphabet Inc Class A (3.12%) |
| Alphabet Inc Class C | Alphabet Inc Class C (3.08%) |
| Berkshire Hathaway Inc Cass B (1.81%) | Broadcom Inc (2.96%) |
| United Well being Group Inc (1.3%) | Costco Wholesale Group (2.15%) |
These are very comparable lists, with all however two corporations showing on either side in very comparable order. QQQ has increased concentrations in these corporations, as anticipated from a fund with fewer holdings total.
If the holdings are so comparable what makes these funds completely different? The reply is solely that after the highest ten, the holdings diverge considerably. Let’s have a look at the subsequent ten holdings for every fund.
| SPY | QQQ |
|---|---|
| ExxonMobil Corp (1.27%) | PepsiCo Inc (2.09%) |
| Eli Lilly and Firm (1.21%) | Adobe Inc (2.04% |
| JP Morgan Chase & Co (1.17%) | Cisco Methods Inc (1.89%) |
| Johnson & Johnson (1.07%) | Comcast Corp Class A (1.61%) |
| Visa Inc (1.04%) | Netflix Inc (1.46%) |
| The Procter & Gamble Firm (0.99%) | T-Cellular US Inc (1.42%) |
| Broadcom Inc (0.95%) | Superior Micro Units Inc (1.35%) |
| Mastercard Included (0.92%) | Texas Devices Ince (1.26%) |
| The Dwelling Depot Inc (0.85%) | Amgen Inc (1.24%) |
| Chevron Company (0.82%) | Intel Corp (1.24%) |
Right here we begin to see an actual divergence within the holdings of the 2 funds. We additionally see the better diversification of SPY: the QQQ record continues to be dominated by tech, whereas SPY has a powerful presence in industries like power, financials, and prescribed drugs.
Which Is Finest for You?
Each SPY and QQQ are stable selections for an investor who’s searching for a top quality index fund. Each are among the many largest and most outstanding ETFs within the nation, and each are extremely liquid.
Your selection shall be based mostly on what you’re searching for in an funding.
- SPY is a comparatively conservative, extremely diversified ETF with very low administration prices, the next dividend yield, and fewer potential for dramatic losses throughout a market downturn.
- QQQ is a extra aggressive, much less diversified fund centered on main tech corporations. This offers it better potential for positive factors in bull market intervals but additionally opens up the potential for important losses in a bear market.
The way you see the markets makes a distinction: should you suppose markets are set for an expansionary part, QQQ could be a more sensible choice. In case you see potential for a market turndown and also you need to reduce prices and dangers, SPY could be your ETF of selection.
If you’re weighing SPY vs QQQ and also you’re having bother making up your thoughts, think about allocating a portion of your portfolio to every fund. Conserving a number of ETFs in your portfolio can present the perfect of each worlds!