QQQ vs QQQM: Why are there Two? What’s the Difference?

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Invesco vs Invesco logo. Deciding between QQQ vs QQQM comes down to higher liquidity vs lower expense ratio. Otherwise, the EFTs are essentially identical.This article compares QQQ vs QQQM — The Invesco QQQ Nasdaq 100 ETF and QQQM Nasdaq 100 ETF.

Both are passively managed index ETFs popular with passive investors and traders looking to match market index returns.

The funds are excellent for dollar-cost averaging and compounding interest. A broker like M1 Finance can be used to optimize the compounding effect by automating dividend reinvestment. 

Index ETFs track market indexes, such as the Dow Jones Industrial Average or the Russell 2000. 

QQQ and QQQM track one of the most widely-watched U.S. stock market indexes: the Nasdaq-100 Index.

Both funds own shares of many of the largest and most innovative U.S. technology companies and pay quarterly dividends. 

Passive index ETF managers do not pick stocks. They allocate funds to all stocks in the benchmark index to track its performance. Managers receive a small fee to achieve this outcome.

Since most actively managed mutual funds do not beat their target benchmarks, many fiduciary financial planners recommend index funds and ETFs instead of actively managed funds or individual stocks.

Bottom Line Upfront (BLUF)

Before I get into the details of QQQ vs QQQM, it’s essential to keep the following in mind:

  • The funds are essentially the same. Either is suitable for your portfolio or trading needs. 
  • QQQ has a 0.20% expense ratio. QQQM has a 0.15% ratio (more on why below).
  • Both funds have outperformed the S&P 500 by a wide margin.
  • QQQ and QQQM only hold stocks listed on the Nasdaq stock exchange, which tend to be (but are not exclusively) technology stocks.
  • Both ETFs are available to purchase from any online broker. I recommend M1 Finance, which is best for dividend investing and dividend reinvestment. 

Please note that both ETFs update their prospectuses regularly. The information referenced in this article will change over time.

The best resource for both funds is the respective ETFs’ websites.

Here are links to the most updated information at Invesco. Consider the information on those pages to be the authoritative data source.

What is the Difference Between QQQ and QQQM?

The primary difference between QQQ and QQQM is the expense ratio.

  • The QQQ expense ratio is 0.20%
  • The QQQM expense ratio is 0.15%

QQQ is one of the world’s largest ETFs, with more than $250 billion in net assets. QQQM has just over $20 billion in net assets. 

But the bigger question is why are there two?

These two differences explain why there are two separate ETFs. 

In a press release announcing the launch of QQQM, Invesco boasted the lower expense ratio and suggested it was a good choice for long-term buy-and-hold investors. QQQ would remain more appropriate for “short-term investors who prioritize liquidity”.

Invesco recognized the trend toward lower fees. By creating a lower-fee QQQM, it would be more competitive with other ETFs without reducing revenue from it’s cash cow — QQQ. 

If Invesco were to cut QQQ’s expense ratio by 25%, it would significantly reduce revenue. At $250 billion in net assets and a 0.20% expense ratio, QQQ brings in approximately $500 million in annual revenue. Cutting the expense ratio to 0.15% would reduce revenue by $125 million. 

Long-time QQQ holders will continue to hold QQQ to avoid capital gains required to switch to QQQM. Heavy traders will stay with QQQ because of its excellent liquidity.

New buy-and-hold investors can go with either fund, but most should choose QQQM for the lower expense ratio

QQQ vs QQQM — Side-by-Side Comparison

Here’s a side-by-side comparison of both ETFs. Scroll right on mobile.

A few noticeable differences comparing QQQ vs QQQM:

  • QQQ is an older fund tracing back to 1999 
  • QQQ is more than 10X larger, making it a more liquid ETF
  • QQQM is newer, so there isn’t as much historical data
  • QQQM is a lower-priced ETF; however, the price is irrelevant
  • Day-to-day data may vary slightly; these funds are virtually identical and will perform in tandem

QQQ vs QQQM — Benchmark Indexes

QQQ and QQQM track the Nasdaq 100 Index, a tech-heavy index of the largest U.S. technology stocks.

Visit this page for the latest information about the Nasdaq 100 index.

The Nasdaq-100 Index is a modified market capitalization-weighted index that measures the performance of 100 of the largest Nasdaq-listed non-financial companies. Companies that meet the selection criteria for eligibility. The Nasdaq rebalances the index quarterly.

QQQ vs QQQM Chart — Performance

Here is a daily updated chart of a $10,000 investment performance in both QQQ vs QQQM since QQQM’s inception (10/13/2020). Scroll right on mobile.

Note that this chart shows the net asset value (NAV) price performance of each ETF after dividend payments. 

Performance is virtually identical. Either fund is suitable as a foundational stock ETF in your portfolio. QQQM has a smaller expense ratio, making it a better choice for buy-and-hold investors. 

See the table above for up-to-date three-, five, and 10-year average annual performance records.

QQQ vs QQQM — Dividend Payout Schedules

Both QQQ and QQQM pay quarterly dividends. 

Investors receive quarterly dividend payments in March, June, September, and December.

QQQ vs QQQM — Top Ten Holdings

Here are the top ten holdings for each index fund. Visit the links at the beginning of the article for the most updated lists. 

QQQ

As of 04/03/2024
# Symbol Company Weight
1 MSFT Microsoft Corp 0.08753
2 AAPL Apple Inc 0.07414
3 NVDA NVIDIA Corp 0.06325
4 AMZN Amazon.com Inc 0.05246
5 META Meta Platforms Inc 0.04759
6 AVGO Broadcom Inc 0.04442
7 GOOGL Alphabet Inc 0.0249
8 GOOG Alphabet Inc 0.02418
9 TSLA Tesla Inc 0.02373
10 COST Costco Wholesale Corp 0.02351
WordPress Table

QQQM

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QQQ and QQQM Equivalents

The most obvious QQQ equivalent is QQQM, and vice versa. These funds are essentially identical. 

Invesco created QQQM as a lower-cost alternative to QQQ. Since QQQ is so large, cutting the expense ratio would significantly cut revenue.  

By creating a QQQ alternative with lower fees, they can keep collecting the QQQ fees but build up a more competitive second fund for more cost-conscious investors.

The closest QQQ equivalent at Vanguard is the Vanguard Information Technology ETF (VGT), though these are not equal. 

VGT tracks the MSCI US Investable Market Information Technology Index and holds more than 300 stocks, while QQQ only holds 100 stocks. 

The VGT mutual fund equivalent at Vanguard is the Vanguard Information Technology Index Fund Admiral Shares (VITAX).

What is the Best Broker to Buy QQQ or QQQM?

Here are my favorite online brokers for investing in ETFs and automatically reinvesting dividends. 

Fidelity and Vanguard are excellent choices for long-term retirement investors. You’re in good hands if your IRA or employer-sponsored plan is with either broker.

I recommend another broker for a more modern user experience that can also serve your banking, borrowing, and spending needs. 

Long-term investors may prefer an online broker better for dollar cost averaging and dividend reinvestment. 

I’m a big fan of the online brokerage M1 Finance. M1 Finance is a reliable, robust, no-fee online broker for beginner and intermediate investors. It’s easy to get started.

As your investing skills and portfolio mature, M1 is one of the best platforms to scale.

They also offer an integrated checking account and low borrowing rates. Read my complete M1 Finance review here

M1 Finance does not offer mutual funds. However, ETFs are plentiful. It’s my favorite online broker for everyday investing. 

The platform is more intuitive than old-school brokers because it’s built on a modern technology platform.

You create portfolio “pies” that contain all the stocks and ETFs you want to own and in what percentages. Simply add an ETF to a pie and add funds to your account. 

Learn More about M1 Finance

Conclusion

Deciding between QQQ vs QQQM comes down to liquidity vs lower expense ratio. Invesco said this in their QQQM launch press release, and it remains true today. 

Long-term buy-and-hold investors should choose QQQM to save 0.05% on the expense ratio.

However, the savings is minimal. Owning QQQ is fine, too; it’s still a relatively low-cost ETF.

Active traders may prefer QQQ because of its significant increase in liquidity. 

Purchase either ETF at any commission-free online broker. 

Please reply with your questions regarding QQQ vs QQQM in the comments section below. Include any requests you have about adding more detail to this article. 

Additional Resources

Disclosure: The author does not own either fund but may own a position in the top ten holdings of each fund. The opinions expressed are solely those of the authors and do not reflect the views of M1. They are for informational purposes only and are not a recommendation of an investment strategy or to buy or sell any security in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. Prior to making any investment decision, you are encouraged to consult your personal investment, legal, and tax advisors.


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