It seems to be a discussion going on for a very long time now. Is it better to invest in VOO vs QQQ ETF, when exposing yourself to the S&P500. On this page, we go in depth to answer this question and touch on live prices, investing cost & the best fit based on several investor profiles.
Quick summary and the rivalry of VOO vs QQQ
Both VOO and QQQ are tickers for ETFs that follow the S&P500 price development. The question, which one to buy, is therefore only relevant if you are looking to invest in the US stock market. Because of the various similarities and differences, we compiled a list below as a summary, and then go into more depth per category:
|Category||Vanguard S&P 500 ETF (VOO)||Invesco QQQ Trust (QQQ)|
|Price ETF||More expensive to buy||Cheaper to buy|
|Cost ETF||Cheaper to hold||More expensive to hold|
|ETF provider AuM||Higher, therefore safer||Lower, therefore less safe|
|Sector, Industry & Weight||Higher diversification, safer||Lower diversification, less safe|
|Total Points||4 points||1 point|
Cost of entry
When you have an investment budget, like most of us, the price of a stock or ETF matters. The price for 1 unit of QQQ is cheaper than 1 unit of VOO. Meaning it would be easier to buy QQQ if you are saving up over time or if you want to invest in other instruments simulatniously. 1 point for QQQ.
On the flip side, there is cost of the ETF itself. The ongoing cost figure for QQQ nets 0.2% whilst VOO is at a mere 0.03%. From a long term investing perspective, you would net more from holdng VOO than QQQ, all else remaining equal. Point for VOO.
Stock exchanges offering VOO vs QQQ
Although it can come down to a personal preference, VOO vs QQQ do not trade on the same exchange. You will find QQQ on the Nasdaq exchange, whilst VOO is bought on the New York Stock Exchange (NYSE). Both remain focused on, and bought from, the US exchange. As a result, no points to hand out here.
As mentioned before, both ETFs follow the same underlying asset: S&P500. This means price development is eactly the same and no difference is present. No points to hand out once again.
Below you can see the relationship between increase and decrease of both ETFs. However, here we see QQQ is netting a higher return due to it's exposure to growth stocks in tech, which will be discussed further below.
Investment class VOO vs QQQ
Based on insights from Morningstar, a fund can be classified as value, blend or growth type. Whilst value disciplines aims to increase steadily at a price level considered undervalued, growth seekers hopes to leverage the promise of future potential. QQQ is considered more of a growth seeker in comparison to VOO which is a blend of the two opposite strategies. As diversification over the long run is a considerable advantage, VOO takes the point.
This one might be a little on the nose. But both ETFs are offered by different large investment companies. Investco offers the Invesco QQQ Trust whilst Vanguard provides the Vanguard S&P 500 ETF. Unless you have a personal preference, it can be beneficial to considering the largest company based on investment capital (Asset under Management a.k.a AuM), to minimize the risk of losing money as a result of the company going bankrupt.
Vanguard currently holds around 7 trillion USD in AuM, whilst Investco holds a mere 1.6 trillion USD in comparison. Therefore one point goes to Vanguard. That being said, both still manage a significant amount of money compared to smaller ETF providers.
Sector, industry and weight
Let's cover VOO first. It has 25% of it's underlying assets in the technology sector, followed by financial servies (14%) and healthcare (13%). The remaining 8th sectors make up for the other half. Although this seems like a high exposure to technology, the latest surge in tech stocks prices are the primary explanation.
QQQ on the other hand, has a much less equally distributed division with a clear focus on technology at 45%, communication at 20% and consumer cyclical at 16%. Then 4 more sectors make up the remaining 19-ish percent, with another 4 sectors at 0% exposure.
Clearly, for a long term view, VOO is more sustainable thanks to diversification which helps weather any market situation more effectively. Especially given tech stocks surge but also come back down & timing the decline is no easy task! Point for VOO.
VOO has come out as the best choice, on some items marginally, based on above criteria. Although the review made shows a clear winning, your personal preference might difer. If you want to invest medium to short term and go for growth stocks, then QQQ is the right fit for you. There also a third option, where you invest in both for good measure.
Regardless of the choice you make, be aware that investing in 1 or 2 ETFs, even if they are diversified, usually isnt enough to build a resistant portfolio. In this example, you would be exposed to the US market only, in the USD currency only. Which can be risky if America passes a certain law, incurs a certain inflation rate or has a certain national crisis.
VOO vs QQQ Frequently Asked Questions
Due to the nature of ETFs, many (new) investors have wondered about the investing possibilities. Below, you can find additional questions on top of this page's content around the topic.
Vanguard S&P 500 ETF, or VOO for short, is an ETF that follows the S&P500. It is considered one of the most popular ETFs to invest in the US stock market by not just Americans, but Europeans and Asians too. Alternatively, many compare VOO to QQQ.
Invesco QQQ TrusF, or QQQ for short, is an ETF that follows the S&P500. It is considered one of the most popular ETFs to invest in the US stock market by not just Americans, but Europeans and Asians too. Alternatively, many compare QQQ to VOO.
For long term investing, VOO is considerably better having a lower OCF, higher diversification and a bigger ETF provider.
For short to mid term investing, QQQ is considerably better having a lower price to buy & investing more in growth stocks.