Recently a strange thing caught my attention. Many people are unaware of the two famous siblings in the stock market – QQQM and QQQ. Therefore, I decided that it’s important that these two brothers must be introduced.
QQQM and QQQ are among the popular exchange-traded funds. They provide great potential to retail investors to increase their portfolio value. QQQ’s past performance has been exceptional so far. It invests in U.S mutual funds and provides a good diversification to the portfolio.
QQQM, on the other hand, is younger than QQQ. Despite its recent inception, the fund has managed to climb up in the list of top ETFs. It provides a relatively lower expense ratio. It gives you a wider diversification potential.
Also, both growth stocks are from Invesco; therefore, you can trust the excellent service.
Moreover, I have done complete research on both these ETFs to make you aware of how incredible they can be for you. So, try not to miss any section of the article.
Key Takeaways
- Invesco manages QQQM and QQQ.
- Both QQQM and QQQ offer low expense ratios, 0.20%, and 0.15%, respectively.
- Both track the Nasdaq 100 index.
- The structure of QQQ is UIT because it strives to precisely duplicate the underlying securities by owning every security.
- The structure of QQQM is an ETF.
- QQQM provides a proportional stake in the pool of stocks, bonds, and other assets.
QQQ vs QQQM – Are They Different?
Similarities
Both QQQ and QQQM are extremely similar to each other. So, there is no sense of competition between them. They both provide growth potential for your portfolio. You can add them together or even use only one of them according to your investment needs.
Besides that, these two ETFs follow the same index – Nasdaq 100. They invest in all the stocks indexed by Nasdaq 100. Moreover, they both have a higher risk than most other ETFs.
Differences
However, I would say that if you want to lessen your risks, go for QQQM instead of QQQ. This is the only difference you will ever notice from all the data. QQQM offers a relatively low expense ratio of 0.15% compared to 0.20% of QQQ. It may sound like a small difference, but it can create a big gap during long-term investments.
Moreover, there is another slight difference between the dividend yield they provide. QQQM is behind QQQ in this sector. QQQM offers a 0.45% dividend yield, whereas QQQ offers 0.47%.
This is definitely not a big difference, but it’s my duty to inform you. If you consider this factor as well, then this difference might help you, right?
QQQ vs QQQM – Composition
QQQ
QQQ is one of the most popular ETFs, with a lot of money flowing through it. Its enormous daily trading volume indicates that it is widely used as a short-term trading vehicle rather than a long-term investment vehicle.
Moreover, QQQ has high liquidity, making frequent trading inexpensive. That said, it doesn’t rule out its usefulness in a tactical exposure to the technology sector for buy and holds investors.
QQQM
QQQM is known as the younger sibling of QQQ, as it launched in October 2020. It is slightly cheaper than QQQ and pretty identical to QQQ. Like its big brother, it also tracks the Nasdaq-100.
However, it is more efficient in terms of fees, share price, and also it reinvests dividends. These things make it more attractive when staged along with QQQ.
Moreover, the differences, even the slight ones, can be observed clearly in the composition table below:
| QQQ | QQQM | |
| Issuer | Invesco | Invesco |
| Inception Date | 1999-03-10 | 2020-10-13 |
| Category | Large Cap Growth Equities | Large Cap Growth Equities |
| Expense Ratio | 0.20% | 0.15% |
| AUM | $188B | $3.7B |
| Total Assets | 215.24B | $3.86B |
| Average Daily $ Volume | $25.56B | $129.71M |
| Underlying Index | NASDAQ-100 Index | NASDAQ-100 Index |
| Number of Holdings | 103 | 104 |
| Top 10 Holding Percentage | 52.57% | 52.59% |
Thus, I hope you have an idea about the differences between QQQM and QQQ. In most cases, both are almost similar. The few noticeable differences are their expense ratio, AUM, net assets, and average daily $ volume.
Holdings
The number of holdings of QQQM and QQQ has a slight difference only. QQQ has 103 holdings, whereas QQQM got one extra, 104. This is not a huge difference that could harm the portfolio if you choose QQQ over QQQM.
Allocations
But, what matters is top holdings, right? So here are the top holdings of QQQM and QQQ.
| QQQ | QQQM | |
|---|---|---|
| Apple Inc. | 12.57% | 12.58% |
| Microsoft Corporation | 10.09% | 10.09% |
| Amazon.com, Inc. | 7.15% | 7.15% |
| Tesla Inc. | 4.07% | 4.07% |
| Alphabet Inc. Class C | 3.94% | 3.94% |
| NVIDIA Corporation | 3.88% | 3.88% |
| Alphabet Inc. Class A | 3.74% | 3.74% |
| Meta Platforms Inc. Class A | 3.56% | 3.56% |
| Broadcom Inc. | 1.79% | 1.79% |
| Adobe Inc. | 1.79% | 1.79% |
| Total Top 10 Weighting | 52.57% | 52.59% |
This table clearly shows that even the top 10 holdings of both QQQM and QQQ are identical. The weightage is also quite similar. Therefore, one can expect a good level of diversification by choosing either of these ETFs.
Diversification
Both QQQM and QQQ ETF are ideal for frequent bullish traders due to their liquidity and superior performance in bull markets. Active traders, on the other hand, should be aware that when QQQ goes down, it can lose more than the S&P 500.
QQQ
Moreover, with enough diversification to avoid the hazards of betting on one firm, the QQQ ETF gives buy-and-hold investors a cheap and long-term growth opportunity. At the same time, long-term investors choosing QQQ must confront sector risk, overvaluation, and the absence of small caps.
QQQM
This is where QQQM comes to rescue the long-term investors. With low volatility, it becomes a perfect choice. It also provides the same diversification opportunity as QQQ as the index they follow is the same – Nasdaq exchange.
QQQ vs QQQM – Past Performance
To compare the performance of both QQQ and QQQM, I have considered QQQM’s inception date as the starting point. As a result, since October 14, 2020, QQQ has earned an annualized return of 22.36 percent, which is roughly equal to the total return of QQQM, 22.31 percent.
Expense Ratio
QQQ is behind QQQM in this department. This difference has helped make QQQ an attractive buy for many investors. The expense ratio of QQQ is 0.20%, compared to 0.15% of QQQM. This difference becomes a great deal in long-term investments.
If you invest $10,000 in QQQ, the fee you will be paying is $20. On the contrary, investing the same amount in QQQM means paying a lower fee of $15. You may neglect the difference but remember that every penny matters when it comes to investments.
Dividend Yield
If you consider dividend yields the main factor in differentiating between the ETFs, QQQ can provide a little extra income. The dividend yield of QQQ is 0.47%, just 0.02 percent more than that of QQQM.
Assets Under Management
QQQ is the clear winner here. It’s because the ETF is present in the market for a longer duration than QQQM. But, QQQM has also managed to join the billion-dollar group in two years. QQQ is managing assets worth $188 billion, and QQQM is managing $3.7 billion of assets as of today.
Tax Efficiency
In my overall evaluation, I have always found that the ETFs of Invesco are generally tax-efficient. ETFs can be used as a tax-efficient financial instrument for investors who want to defer capital gains until the time of sale. QQQ and QQQM are no exception; both have a tax-efficient structure. So, my tax advice is to choose any of them without worrying about tax.
QQQ vs QQQM – Environment, Social and Governance Ratings (ESG)
The MSCI ESG is a registered investment adviser under the Investment Advisers Act of 1940. It provides fund ratings and assesses the resiliency of portfolios to long-term risks and opportunities posed by environmental, social, and governance issues. The top-rated fund receives an AAA, while the worst-rated fund gets CCC.
Highly rated mutual funds are those that have demonstrated strong or improving management of financially important environmental, social, and governance issues. Some organizations, on the other hand, maybe well-positioned to withstand adverse environmental effects.
Let’s look at how many ratings do these two equity ETFs got –
| QQQ (AA) | QQQM (AA) | |
| MSCI ESG Quality Score | 7.74 / 10 | 7.74 / 10 |
| Peer Group Percentile Rank | 66.19 | 66.55 |
| Global Percentile Rank | 67.57 | 67.63 |
| SRI Screening Criteria Exposure | 1.73% | 1.74% |
| Exposure to Sustainable Impact Solutions | — | — |
| Weighted Avg. Carbon Intensity (t CO2e/$M Sales) | 50.59 | 50.60 |
The table shows that even the ESG ratings are similar of these two ETFs. But, now the question is, which one to choose, right?
QQQ vs QQQM – Is the Latest QQQM Worth Purchasing Over QQQ?
For ETF investors, the existence of a lower trading costs competitor eating on fees and offering similar returns is almost always desirable. QQQM offers better management of dividends, less average spread, and less volatility. But it is difficult to say which one will have better future performance.
However, my choice will be to stick with QQQM as it offers almost similar returns, identical perks, same entire risk profile at a much cheaper price. Moreover, if you’re investing in a tax-advantaged account and own QQQ, move to QQQM. End of story.
Also, the buyers should carefully review the performance of each ETF over the past few months to better understand their choice. It’s because different market scenario requires different trading strategy.
Final Words
Looking to invest in technology ETFs and got confused between QQQ and QQQM? Well, don’t put much pressure on your mind and just select QQQM. Everything that QQQ offers come with QQQM.
When it comes to performance, QQQM has managed to match QQQ’s return percentage every year since its inception. The only difference between the two is that QQQ can provide a little extra income via dividend yield.
So, whichever ETF you choose, don’t forget to do proper research first. After all, it’s the money that is involved; risks are always greater than we think.