QQQ is superior to VGT
It is no secret, own 1300 shares of QQQ. I share this on social media every week. Without fail, I get this question:
“Why not VGT? The fees are lower”
The quick answer is this: “Because the data shows QQQ is better, and VGT has weird exclusions.”
“What’s a weird exclusion?” you ask? Let’s dig in.
First what is QQQ?
The QQQ or “The Triple Q” is an ETF that tracks the Nasdaq 100 Index.
It is a stock index of the largest 100 non-financial companies on the Nasdaq.
Definition out of the way, let’s see why it is superior.
Reason 1: Performance
QQQ has outperformed VGT. In the 17 years since VGT has been around QQQ has given more returns to its investors.
Also note QQQ in the chart below, that it has outperformed the S&P 500 index ETF SPY.
Reason 2: Diversification
While VGT is ONLY tech, QQQ is the top 100 stocks on the Nasdaq. QQQ is not JUST tech stocks Here is the sector breakdown for QQQ
Reason 3: Better risk adjusted returns
Risk adjusted returns for QQQ beat VGT. This means for every unit of risk you took on, you were rewarded with more returns.
Here is a chart showing the Sharpe ratio for the two funds over recent past.
Reason 4: Concentration risk
While VGT holds 361 stocks, Apple (AAPL) and Microsoft (MSFT) account for 37% of the total fund. In comparison, QQQ only holds 100 stocks, but Apple and Microsoft only account for 21%.
This means VGT investors are more susceptible to price fluctuations with these two companies.
Here are the holdings of VGT
Reason 5: Weird exclusions
VGT does NOT include:
– AMZN
– GOOG
– TSLA
– FB
QQQ does ✔️
Do you not think it weird for a tech ETF to exclude FB, GOOG, AMZN? These are the giants of social media, search, and cloud computing.
In my own professional career I’ve helped large organizations off load their on-premise IT infrastructure over onto Amazon AWS cloud infrastructure.
And we don’t need to get into how influential Facebook and Google are with online advertising, search, and social media. Remember, Instagram is a Facebook product.
Reason 6: Size & Volume
QQQ is a beast – $216B market cap
VGT is smaller – $58B
Trading is more active on QQQ, so you will get a good bid when you sell, even during a crash or panic sale.
Reason 7: Options market
QQQ: 9,400,000 open contracts
VGT: 5,100 open contracts
There is no comparison, NONE. Why is this important?
If you ever want to hedge, lever, or generate additional income, QQQ will do it faster, cheaper, and better than VGT.
Summary:
VGT has a fee of 0.10%
QQQ has a fee of 0.20%
But in all other ways QQQ is far superior to VGT
– risk
– performance
– diversification
– options market
Makes QQQ superior to VGT
Not to mention those weird exclusions!
