Last updated on April 21st, 2022 , 12:49 pm
In 2022, there are a lot of different Nasdaq funds to choose from. In this article, projectfinance will compare five of the more popular ETFs in the tech space: QQQJ, QQQM, QQQN, QQQE and QQQ.
It is important to note that a few of the funds on our list are almost identical (QQQ & QQQM), while others are quite different indeed (QQQJ & QQQE).
So which fund is best for you? Let’s first break down the data from our 5 ETFs in a table, and then put each one under the microscope!
TAKEAWAYS
- The QQQ ETF tracks the Nasdaq 100 Index and is the oldest and most popular fund on our list.
- QQQM is basically an exact replica of QQQ with lower fees.
- QQQE tracks the Nasdaq 100 on an “equal weight” basis, which provides better diversification.
- QQQJ tracks the next 100 stocks in queue for inclusion in the Nasdaq-100 Index.
- QQQN tracks the next 50 stocks in queue for inclusion in the Nasdaq-100 Index.
| QQQJ | QQQM | QQQN | QQQE | QQQ | |
|---|---|---|---|---|---|
|
Fund Issuer: |
Invesco |
Invesco |
VictoryShares |
Direxion |
Invesco |
|
Fund Name: |
|||||
|
Fund Category: |
Mid-Cap Growth |
Large-Cap Growth |
Mid-Cap Growth |
Large-Cap Growth |
Large-Cap Growth |
|
Underlying Index: |
|||||
|
Expense Ratio (fees): |
0.15% |
0.15%. |
0.18% |
0.35% |
0.20% |
|
Number of Holdings: |
101 |
104 |
49 |
102 |
102 |
|
1 Year Return: |
-7.92% |
+14.06% |
-8.07% |
+4.56% |
+14.15%
|
|
Morningstar Rating: |
Not Rated |
Not Rated |
Not Rated |
☆☆☆☆ |
☆☆☆☆☆ |
|
Fund Inception Date: |
10/13/2020 |
10/13/2020 |
09/09/2020 |
03/21/2012 |
03/10/1999 |
|
Fund Structure: |
ETF |
ETF |
ETF |
ETF |
UIT |
What Is the QQQ ETF?
- Fund Name: Invesco QQQ Trust Series 1
- Expense Ratio: 0.20%
- Benchmark: NASDAQ 100
Invesco’s QQQ Exchange-Traded Fund (ETF) is the dinosaur on our list. It was one of the first NASDAQ funds issued and has been active since 1999. The next oldest fund on our list is QQQE, which began 13 years later in 2012.
The Invesco QQQ ETF passively follows the Nasdaq 100 index.
➥ The Nasdaq 100 Index represents 100 of the largest US and international non-financial companies listed on the Nasdaq Stock Market.
Like most of the funds on our list, QQQ is dominated by big technology companies. The larger of these companies include the “FAANG” stocks – Facebook, Amazon, Apple, Netflix, and Google.
So how have big tech companies fared in the overall market, as indicated by the S&P 500 tracking ETF SPY?
Let’s find out!
QQQ vs SPY: 5 Year Chart
As we can see, QQQ has outperformed SPY considerably over the past 5 years.
Let’s next take a look under the hood of QQQ by looking at its sector allocation strategy and top holdings.
QQQ Sector Allocation
Image from Invesco
Ae we can see, Invesco’s QQQ ETF is more than just a tech fund. In addition to information technology companies, its sector allocation spans across multiple sectors and industries.
But what companies in these sectors does QQQ invest in most? Let’s take a look at the big five next!
QQQ Top Five Holdings
| Company | Weight |
|---|---|
|
Apple Inc |
12.53% |
|
Microsoft Corp |
10.22% |
|
Amazon.com Inc |
7.32% |
|
Tesla Inc |
4.95% |
|
NVIDIA Corp |
4.00% |
QQQ has huge exposure to AAPL. Why is this? The Nasdaq 100 is a modified capitalization-weighted index. AAPL is the largest company by market capitalization and therefore has the greatest weight.
Not all ETFs on our list are weighted; QQQE (which we will soon get to) is an equal weight ETF.
What Is the QQQM ETF?
- Fund Name: Invesco NASDAQ 100 ETF
- Expense Ratio: 0.15%
- Benchmark: NASDAQ 100
Invesco’s Nasdaq 100 ETF QQQM has a lot in common with their QQQ fund. The stocks contained within these two funds are mirror images of each other. However, there are two differences worth noting:
QQQ vs QQQM: 2 Differences
- QQQ is structured as a UIT (unit investment trust) while QQQM is an ETF.
- QQQ charges a fee of 0.20%; QQQM charges a fee of 0.15%
QQQ being structured as a UIT makes no material difference on the performance of the fund when comparing it to QQQM’s performance.
What should interest you here is the difference in expense ratios. QQQ does indeed charge a higher fee than QQQM. Though the difference is relatively small (0.05%), over time, fees and expenses can really add up.
What we have here, essentially, is two identical funds with one charging a higher expense ratio. QQQM wins every time.
QQQM Sector Allocation
Image from Invesco
QQQM Top Five Holdings
| Company | Weight |
|---|---|
|
Apple Inc |
12.53% |
|
Microsoft Corp |
10.22% |
|
Amazon.com Inc |
7.32% |
|
Tesla Inc |
4.95% |
|
NVIDIA Corp |
4.00% |
What Is the QQQE ETF?
- Fund Name: Direxion NASDAQ-100 Equal Weighted Index Shares
- Expense Ratio: 0.35%
- Benchmark: NASDAQ-100 Equal Weighted Index
Both QQQ and QQQM track the Nasdaq-100 Index. This index is weighted.
The top 5 stocks in both QQQ and QQQM account for approximately 40% of these funds’ value. That’s not a lot of diversification!
To answer this desire for diversification, the NASDAQ-100 Equal Weighted Index was created.
In 2012, Direxion created an ETF to track this index: The Direxion NASDAQ-100® Equal Weighted Index Shares (QQQE).
This ETF has equal weighting on all of its holdings. For example, AAPL (which is 12.5% of QQQs holdings) represents 1% of QQQE’s fund.
Since the smallest company in this index has the same weight as the largest company, it is better diversified.
However, this diversification comes with a price: QQQE charges a fee of 0.35%, the highest on our list.
Is the cost justified? Let’s compare QQQ/QQQM with QQQE to find out.
QQQ/QQQM vs QQQE
Though QQQE is a great alternative to the top-heavy QQQ ETF, its performance has lagged. Why? It places more weight on those smaller companies, which tend to be focused on consumer staples, industries, and utilities.
Historically, these less volatile stocks underperform the FAANG juggernauts, as shown in the 5-year chart below.
QQQE Sector Allocation
The below chart illustrates the difference between sector allocation in QQQ/QQQM (as represented by XNDX) and the QQQE equal-weighted index (as represented by NETR).
Image from Direxion
QQQE Top 5 Holdings
Every one of the holdings within the QQQE ETF has the same weight of 1%.
| Company | Weight |
|---|---|
|
Apple Inc |
1% |
|
Microsoft Corp |
1% |
|
Amazon.com Inc |
1% |
|
Tesla Inc |
1% |
|
NVIDIA Corp |
1% |
What Is the QQQJ ETF?
- Fund Name: Invesco NASDAQ Next Gen 100 ETF
- Expense Ratio: 0.15%
- Benchmark: NASDAQ Next Generation 100 Index
So far, we have only looked at ETFs that track the Nasdaq 100 Index.
Invesco’s QQQJ Next Gen ETF tracks the NASDAQ Next Generation 100 Index.
These are the companies in the waiting pool to join the Nasdaq 100. There are no mega-cap stocks in this index. QQQJ is mostly comprised of mid-cap stocks.
Stocks in this index are the less capitalized “up-and-comers” in the tech space.
Because of this, QQQJ can be more volatile than the other ETFs we have covered in this list.
QQQJ Sector Allocation
Image from Invesco
QQQJ Top 5 Holdings
| Company | Weight |
|---|---|
|
Trade Desk Inc/The |
2.18% |
|
MongoDB Inc |
2.00% |
|
Expedia Group Inc |
1.97% |
|
Enphase Energy Inc |
1.95% |
|
CoStar Group Inc |
1.82% |
What Is the QQQN ETF?
- Fund Name: VictoryShares Nasdaq Next 50 ETF
- Expense Ratio: 0.18%
- Benchmark: Nasdaq Q-50 Index
Victory Shares Nasdaq Next 50 ETF QQQN tracks the Nasdaq Q-50 index.
This ETF is similar to the QQQJ ETF, but QQQN only tracks the next 50 stocks in line to join the Nasdaq 100.
Let’s do a quick 1-year comparison between QQQJ and QQQN.
QQQJ vs QQQN: 1 Year Chart
As we can see, the performance of these two ETFs is quite similar.
It is worth noting that the stocks within QQQN are better capitalized than those that comprise QQQJ. Because of this, QQQN should experience marginally less volatility than QQQJ over time.
QQQN Sector Allocation
Image from VictoryShares
QQQN Top Five Stocks
| Company | Weight |
|---|---|
|
BAKER HUGHES CO |
3.46% |
|
GLOBALFOUNDRIES INC |
3.09% |
|
TRADE DESK INC |
2.97% |
|
MONGODB INC |
2.80% |
|
ENPHASE ENERGY INC |
2.72% |
QQQJ vs QQQM vs QQQN vs QQQE vs QQQ: What's The Best?
A lot of the funds on our list are relatively new, so it is impossible to compare their long-term performance.
-
QQQ, QQQM, and QQQE all track the Nasdaq 100 index.
-
QQQJ and QQQN track the more growth-centric companies just outside of the Nasdaq 100.
-
A well-diversified portfolio will have exposure to as many stocks as possible, including those within the Nasdaq 100 as well as those on the cusp of joining the index.
FAQs: QQQJ vs QQQM vs QQQN vs QQQE vs QQQ
QQQ is structured as a unit investment trust (UIT) while QQQM is structured as an ETF. Though their performance is identical, QQQM charges a lower expense ratio of 0.15% as compared to the QQQ fee of 0.20%
QQQ invests tracks the Nasdaq 100 index while QQQJ tracks Nasdaq Next Generation 100 Index (Index). This latter index invest in the 101st to the 200th largest companies on the NASDAQ.
Historically, QQQE has underperformed QQQ. QQQE’s equal weight structure applies more allocation to companies outside of tech, such as consumer staples and utilities. These sectors generally underperform in bull markets.
So if you had to choose one of these Nasdaq ETFs to invest in, which one would it be?
Hey Paul! That’s impossible to say! Nobody knows what will happen in the future (will mid-caps outperform large-caps??)
QQQ and QQQM are, however, the most popular ETFs on the list. These products are identical, with QQQM charging a lower fee than QQQ.