VUG vs QQQ: Comparing Popular Growth ETFs

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Invesco vs Vanguard logos. A decision between VUG vs QQQ. This article compares VUG vs QQQ — The Vanguard Growth ETF vs the Invesco QQQ Nasdaq 100 ETF.

Both are passively managed index ETFs popular with tech investors looking to achieve above-market returns associated with technology bellwether stocks instead vs risk-free high-yield savings.

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

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

VUG tracks a lesser-known information growth index called the CRSP US Large Cap Growth Index.

Both funds own shares of many of the largest 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 VUG vs QQQ, it’s essential to keep the following in mind:

  • Both funds are growth and technology-focused and pay low dividends. 
  • QQQ has historically outperformed VUG by a wide margin.
  • QQQ holds only stocks listed on the Nasdaq stock exchange, which tend to be technology stocks (but are not exclusively). It excludes financial companies.
  • VUG holds U.S. large-cap growth stocks and includes financials, NYSE stocks, and Nasdaq stocks. It’s benchmark defines its holdings. 
  • Both ETFs have significant concentration risk — the top 10 holdings comprise half the funds. 
  • Buy ETFs 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, and the information in this article will change over time.

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

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

Side-by-Side Comparison

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

A few noticeable differences comparing VUG vs QQQ:

  • QQQ is an older fund tracing back to 1999. VUG was started five years later. 
  • VUG is smaller and has twice the number of holdings, but it has high concentration risk, with more than 55% of the fund in just 10 stocks. 
  • QQQ has outperformed VUG over three, five, and ten years.  
  • The dividend yields of both funds are low vs broader market indexes like the S&P 500.
  • VUG has a lower expense ratio. 

Benchmark Indexes

VUG tracks the CRSP US Large Cap Growth Index.

Visit this page for the latest CRSP US Large Cap Growth Index information.

The index represents the Growth Style for companies covering top 85% of cumulative capitalization of CRSP US Total Market.

The index is designed to hold large-cap U.S. growth stocks that tend to pay low or no dividends. Stocks with no dividends have a lower year-to-year tax consequence. 

VUG holds companies that trade on the NYSE and Nasdaq, while QQQ holds a wide range of Nasdaq Composite companies. VUG holds financial stocks, QQQ does not.

QQQ tracks 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.

VUG vs QQQ Chart — Performance

Here is a daily updated chart of a $10,000 investment performance in both VUG and QQQ over ten years. Scroll right on mobile.

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

Past performance is not indicative of future results. 

Either fund is suitable as a foundational stock ETF in your portfolio. VUG and QQQ are growth ETFs paying smaller dividends than broader market indexes. Some investors may prefer lower yields to reduce taxable income.

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

QQQ vs VUG — Dividend Payout Schedules

Both VUG and QQQ pay quarterly dividends. 

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

Top Ten Holdings for VUG and QQQ

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

VUG

As of 05/23/2024
# Symbol Company Weight
1 MSFT Microsoft Corp. 0.12558
2 AAPL Apple Inc. 0.1084
3 NVDA NVIDIA Corp. 0.08888
4 AMZN Amazon.com Inc. 0.07078
5 GOOGL Alphabet Inc. Class A 0.04138
6 META Facebook Inc. Class A 0.04126
7 GOOG Alphabet Inc. Class C 0.03439
8 LLY Eli Lilly & Co. 0.02912
9 TSLA Tesla Inc. 0.02164
10 V Visa Inc. Class A 0.01798
WordPress Table

QQQ

As of 05/03/2024
# Symbol Company Weight
1 MSFT Microsoft Corp 0.08478
2 AAPL Apple Inc 0.07708
3 NVDA NVIDIA Corp 0.0633
4 AMZN Amazon.com Inc 0.05327
5 AVGO Broadcom Inc 0.04561
6 META Meta Platforms Inc 0.04413
7 GOOGL Alphabet Inc 0.02811
8 GOOG Alphabet Inc 0.02736
9 TSLA Tesla Inc 0.02589
10 COST Costco Wholesale Corp 0.02428
WordPress Table

 


VUG and QQQ Equivalents

The VUG mutual fund equivalent is VIGAX, the Vanguard Growth Index Fund Admiral Shares.

The most obvious QQQ equivalent is QQQM.

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.

Another QQQ near equivalent is the Vanguard Information Technology ETF (VGT), which is similar.

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

Customers of online brokers that charge fees for mutual funds should use VUG or QQQ ETFs instead of mutual funds.

Mutual funds trade differently than ETFs, which trade like stocks. 

ETFs are easier to own, and their prices change throughout the day. Mutual funds only trade at the market close. 

Active investors typically use ETFs for trading purposes or to buy and hold indexes when they can’t access index mutual funds.

For example, if you have an investing account with M1 Finance, you’d invest via ETFs instead of mutual funds. If your account is with Vanguard, you may benefit from using the index fund VIGAX because it’s slightly easier to reinvest capital gains and dividends. 

Conclusion

Deciding between VUG vs QQQ comes down to preference for technology growth vs general large cap growth which includes financials. 

Though QQQ is technology-heavy, it also holds consumer and retail stocks. VUG holds twice as many stocks in the large cap growth category. 

VUG generally represents a broader range of growth companies by holding more companies than QQQ, which excludes financials (e.g., fintech)

QQQ has outperformed VUG because it has a smaller pool of stocks which have performed well in recent years. But the ETFs have a lot overlap, especially because the have a high holdings concentration of tech heavyweights like Microsoft, Amazon, Apple, and Nvidia. 

With concentration risk toward tech heavyweights, short-term losses are more likely when the markets become volatile because these stocks make up a significant portion of the market.

Reduce risk by maintaining a long-term investment horizon (10+ years) and dollar-cost average — invest fixed amounts regularly — into VUG or QQQ to reduce this risk.

QQQ has a higher expense ratio than VUG. Those looking for a lower-fee alternative for QQQ should choose QQQM, which is identical. 

Purchase either ETF at any commission-free online broker. I prefer M1 Finance.

Please reply with your questions regarding VUG vs QQQ 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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