QQQ vs. QQQM - Which ETF for the Nasdaq 100 Index?

QQQ from Invesco is one of the most popular funds out there. It tracks the NASDAQ 100 Index. QQQM is new on the scene and tracks the same index. What’s the deal?

// TIMESTAMPS:

00:00 - Intro
00:15 - QQQ vs. QQQM
03:06 - Conclusion & Outro

// SUMMARY:

QQQ and QQQM are two funds from Invesco that seek to track the same index: the NASDAQ-100. These are the 100 largest non-financial companies by market cap that trade on the NASDAQ exchange. This index defines itself as companies “on the forefront of innovation.” It is purely large cap growth. As such, it’s basically a tech fund at this point due to Big Tech making up such a huge chunk of the market.

First, note that QQQ is structured as a unit investment trust. It is one of the most actively traded funds in the world. It has over $180 billion in assets at this point and an average daily volume of over $12 billion. QQQ launched in 1999. It’s grown even more in popularity over the past decade or so due to its market outperformance thanks to the stellar run by Big Tech. It also has a 3x leveraged cousin TQQQ.

If you don’t already know, QQQ is not at all a well-diversified fund, and should not replace a broad market index like the S&P 500 as a core holding in a diversified portfolio. Again, it’s mostly tech companies; sectors like Utilities, Industrials, and Consumer Staples are all but absent from this fund.

Now let’s talk about QQQM. It’s an open-ended ETF. It launched in late 2020, over 20 years after its older brother. While it’s no slouch in absolute terms, it has a tiny fraction of the assets of QQQ – about $1.25 billion. Since QQQ has all the name recognition, QQQM hasn’t attracted the assets that we might expect given its lower fee.

QQQM tracks the same index – the NASDAQ 100. The important differentiator for investors looking to buy and hold this index for the long term is the fee. QQQ has a fee of 0.20%, while QQQM is cheaper at 0.15%. If you’re using a tax-advantaged account and you currently own QQQ, switch to QQQM. Period.

Day traders, on the other hand, will appreciate the much greater liquidity and smaller spread of QQQ. Specifically, the average spread on QQQ is $0.01, compared to $0.03 for QQQM.

So why 2 funds for the same index from the same provider?

Invesco’s launch of QQQM is a response to the demand from retail investors for lower fees, which has been great for the industry as a whole and can be seen from the likes of Vanguard, Schwab, etc. competing with each other for assets. Why wouldn’t Invesco just lower the fee of QQQ from 0.20% to 0.15% and call it a day? In short, the seemingly small difference of 0.05% would account for nearly $100 million in revenue annually for them.

#investing #stocks #stockmarket #etfs #etf #nasdaq #qqq

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[OptimizedPortfolio]

Many don't even know QQQM exists. Do you own either of these funds?

[brx]

Didnt know QQQM was a thing until I was looking to rebalance my HSA today. Thanks for the awesome, straightforward video... SUBSCRIBED!

[cristian]

Thanks a lot for your specific and detailed explanation. Mostly appreciated!

[rainetravels]

I have both and I bought QQQ20 years ago and when I did a rollover in 2023 February. I bought q q q m

[papabear]

Switching to QQQM. Thanks for the information.

[Freedomthirtyfiveblog]

Great explanation. I did some research on the pair and came to the same conclusion as you. Since I'm a trader I prefer to use QQQ.
I don't know if you've heard about the VGT etf, but it's basically a tech fund and performed better than QQQ and QQQM over the last 5 years.🙂

[raulasharma]

After watching this I decided to buy QQQM instead of QQQ

[testpattern]

QQQ is advertised on national television. That's one reason the expense ratio is higher. TV advertising costs no small amount of money.

[Sergiosvm]

So what if qqq isn't diversified? Warren Buffett's portfolio isn't exactly diversified either with over 40% in apple.
I'm only holding qqq in my portfolio

[BetterStrongerFaster-Orange]

In my opinion for long term QQQM and QQQ day trading.

[RobT]

I have two portfolios, my brokerage account and my 401k. My 401k is 70% s&p 500 and the other 30% is split between 3 growth funds. The brokerage account my core is VOO, then QQQ and DIA, I like to have all of the big 3 indexes so that I have exposure to all of the gains and diversity of each fund. I am in for the long-term and will hold for 30 plus years, will reinvest dividends for 30 years is my strategy. Also I have a high yield savings account(1.20%APY) for my rainy day fund but also because I believe in having some access to cash that I way I never have to sell any stocks.

[UtiliTerran]

What do you think about holding qqq(m) to compliment a S.C.V. tilt? Since qqq(m) has roughly double the concentration of big tech growth of VOO, adding qqq(m) in the same proportion as a S.C.V. would effectively bring a portfolio back up to market weight for tech, which seems like the driving sector in the market now. E.G. 50% VOO, 25% AVUV, 25% QQQM

[fredymarcelo]

I live in Portugal and here M1 Finance doesn't work, do you have any more idea of an ETF broker that can work here (European continent)?

[rafeejajou]

What about an equity portfolio with 20% QQQM and 80% SCHD? There is only an overlap of 3 stocks. This is much better than SPY/SCHD which is over 30 stocks, increasing exposure during a drawdown.

[jaymoar]

Ok so I’m going to hold my investments for at least 10 years so should I go QQQ or QQQM? I’m sorry I’m new to this and I still don’t really understand what liquidity means.

[SugarLandFishingBros]

I have 5K in a taxable brokerage account. Should I switch to QQQM?

[moneymanfernando]

I don`t know QQQM. So, there is no difference between QQQM and QQQ??