19 important things you should know about PowerShares QQQ before you buy it

Jennalyn Sobrevilla: Aug 11, '18


Are you looking to invest in PowerShares QQQ  Trust ETF and would like to get some really important data points about this fund (including alternatives to investing in QQQ)?  If so, you came to the right place.   

In this PowerShares QQQ review, we’ll address key questions our readers have been asking us about this ETF, beyond what you can normally find on Yahoo Finance and ETF.com.

PowerShares QQQ  is a top U.S. - Large Cap Growth fund by assets and is hugely popular among individual investors.  We’ll cover some of the basic and advanced topics you should know about QQQ, such as:

  1. QQQ ETF profile
  2. QQQ underlying index (i.e., what does it track?)
  3. QQQ holdings
  4. QQQ historical performance
  5. QQQ dividend yield
  6. QQQ expense ratio
  7. QQQ tax efficiency (implications of investing in QQQ on taxable accounts)
  8. QQQ beta (risk level)
  9. QQQ Sharpe ratio (risk-adjusted return)
  10. QQQ vs VTSAX
  11. QQQ vs SOXX
  12. QQQ vs VUG
  13. QQQ vs FDN
  14. QQQ vs VTI
  15. QQQ vs XLK
  16. QQQ vs TQQQ
  17. QQQ vs VGT
  18. QQQ vs SPY
  19. QQQ vs. other ETFs or mutual funds

So let’s start.  Scroll down to questions that are most interesting to you.

1. What is QQQ?

QQQ is an ETF that generally corresponds to the price and yield performance of the component securities of the Nasdaq-100 Index.

2. What is the underlying index for QQQ?

NASDAQ-100 Index.

3. How many stocks does QQQ have as its holdings? What are the top holdings?

QQQ has 104 stocks as its holdings.

The top 10 holdings represent 53.28% of total QQQ assets.  Here are the top holdings:

NameSymbol% Assets
Apple IncAAPL12.19
Microsoft CorpMSFT8.95
Amazon.com IncAMZN7.41
Facebook Inc AFB5.96
Alphabet Inc CGOOG4.94
Alphabet Inc AGOOGL4.3
Intel CorpINTC2.99
Cisco Systems IncCSCO2.38
Comcast Corp Class ACMCSA2.37
Amgen IncAMGN1.79

4. How did QQQ perform historically?

QQQ has generated the following returns:

  • 1-months return is 1.13%;
  • 3-months return is 7.41%;
  • 1-year return is 25.70%;
  • 3-years return is 18.19%;
  • 5-years return is 20.55%;
  • 10-year annualized return is 15.39%;
  • YTD return is 10.62%.

5. What is QQQ dividend yield?

QQQ dividend yield is 0.84%.  A dividend yield is a ratio between an ETF’s annual dividend payout and its current price. 

QQQ annualized payout is $1.51.  An annualized payout is a standard in finance that lets you compare companies or funds that have different payout frequencies.

6. What is QQQ expense ratio?

QQQ expense ratio is 0.2%. The expense ratio of a fund is the total percentage of fund assets used for administrative, management, and all other expenses.

7. What is QQQ tax efficiency (tax-cost ratio)?

QQQ tax-cost ratio is 0.34%, which is significantly lower than the average ETF tax-cost ratio.  The tax-cost ratio measures how much a fund’s annualized return is diminished by the taxes investors pay on distributions. Funds like QQQ regularly distribute dividends and capital gains.

8. What is QQQ beta? How would you assess QQQ risk?

QQQ 3-year beta is 1.22, which means the fund is riskier than the average S&P 500 fund.  Beta is a measure of the volatility, or systematic risk, of a fund in comparison to the market as a whole. S&P 500 Beta is equal to 1. A Beta higher than 1 means riskier than the market overall; conversely, lower than 1 means less risky than the market.

9. What is QQQ Sharpe ratio?

The 3-year Sharpe ratio for QQQ is 1.35.  The fund has a higher 3-year risk-adjusted return relative to the average S&P 500 fund.  

The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.

10. Compare and contrast: QQQ vs VTSAX.

QQQ is a large-cap ETF focused on tech stocks, while VTSAX is a large-blend US-focused mutual fund (that includes all types of stocks, not just tech).  VTSAX has a much higher number of holdings than QQQ; approximately 3,600.  

QQQ has a higher expense ratio than VTSAX: 0.20% vs. 0.04%.  Over the last 5 years, QQQ returned is 20.55%, while VTSAX did 12.72%.

Below is a comparison between QQQ and VTSAX.


QQQVTSAX
Security TypeETFMutual fund
SegmentEquity: U.S. - Large CapU.S. Equity: Large Blend
Net Assets$63.24B$200.75B
Expense Ratio0.20%0.04%
Management Stylepassive (index-based)passive (index-based)
Minimum InvestmentN/A$10,000
YTD Return10.61%-0.23%
1-Year Return25.70%13.09%
3-Year Return18.19%10.18%
5-Year Return20.55%12.72%
10-Year Return15.39%N/A
1-Year Tax Cost Ratio0.25%0.78%

VTSAX tracks the performance of a benchmark index that measures the investment return of the overall stock market. The fund employs a "passive management" approach designed to track the performance of the CRSP US Total Market Index.

11. Compare and contrast: QQQ vs SOXX.

QQQ is a large-cap ETF that tracks NASDAQ 100, while SOXX is a US semiconductors ETF.  SOXX has only 30 holdings, while QQQ has over 100.

SOXX has a higher expense ratio than QQQ: 0.48% vs. 0.20%.  Over the last 10 years, QQQ returned more than SOXX (15.39% vs. 14.63%).  

Below is a comparison between QQQ and SOXX.


QQQSOXX
SegmentEquity: U.S. - Large CapEquity: U.S. Semiconductors
Net Assets$63.24B$1.60B
Expense Ratio0.20%0.48%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexNASDAQ-100 IndexPHLX Semiconductor Sector Index
YTD Return10.61%5.54%
1-Year Return25.70%28.48%
3-Year Return18.19%26.13%
5-Year Return20.55%24.54%
10-Year Return15.39%14.63%
1-Year Tax Cost Ratio0.25%0.34%

SOXX seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Goldman Sachs Technology Industry Semiconductor Index.

12. Compare and contrast: QQQ vs VUG.

VUG is a large-cap growth stock ETF focused on the US market, while QQQ is a tech ETF.  VUG has over 300 holdings, while QQQ has about 100.  

VUG includes a lot of tech stocks in its portfolio; however, some of its largest holdings are non-tech stocks such as Coca-Cola and The Home Depot 

QQQ has a higher expense ratio than VUG: 0.20% vs. 0.06%.  Over the last 10 years, QQQ returned more than VUG (15.39% vs. 11.18%).  

Below is a comparison between QQQ and VUG.


QQQVUG
SegmentEquity: U.S. - Large CapEquity: U.S. - Large Cap Growth
Net Assets$63.24B$33.39B
Expense Ratio0.20%0.06%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexNASDAQ-100 IndexCRSP US Large Cap Growth Index
YTD Return10.61%7.07%
1-Year Return25.70%19.32%
3-Year Return18.19%13.31%
5-Year Return20.55%15.37%
10-Year Return15.39%11.18%
1-Year Tax Cost Ratio0.25%0.29%

VUG seeks to track the performance of a benchmark index that measures the investment return of large-capitalization growth stocks. The fund employs a "passive management"--or indexing--investment approach designed to track the performance of the MSCI US Prime Market Growth Index.

13. Compare and contrast: QQQ vs FDN.

FDN tracks US internet stocks, whereas QQQ tracks top 100 US tech stocks.  FDN has 42 holdings.  

FDN has a higher expense ratio than QQQ: 0.54% vs. 0.20%.  Over the last 10 years, FDN returned more than QQQ (19.95% vs. 15.39%).

Below is a comparison between QQQ and FDN.


FDNQQQ
SegmentEquity: U.S. InternetEquity: U.S. - Large Cap
Net Assets$6.30B$63.24B
Expense Ratio0.54%0.20%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexDow Jones Internet Composite IndexNASDAQ-100 Index
YTD Return25.27%10.61%
1-Year Return45.29%25.70%
3-Year Return27.00%18.19%
5-Year Return24.84%20.55%
10-Year Return19.95%15.39%
1-Year Tax Cost Ratio0.00%0.25%

FDN seeks investment results that correspond generally to the price and yield of an equity index called the Dow Jones Internet Composite Index. The fund invests at least 90% of its total assets in common stocks that comprise the Index. The Index is composed of Internet commerce and services companies.

14. Compare and contrast: QQQ vs VTI.

QQQ is a large-cap tech stock ETF, while VTI is a US - total market ETF.  QQQ has ~100 stocks as its holdings, while VTI has over 3,600.  VTI also includes mid- and small-cap US stocks.

QQQ has a higher expense ratio than VTI: 0.20% vs. 0.04%.  Over the last 10 years, QQQ returned more than VTI (15.39% vs. 10.34%)

Below is a comparison between QQQ and VTI.


QQQVTI
SegmentEquity: U.S. - Large CapEquity: U.S. - Total Market
Net Assets$63.24B$94.96B
Expense Ratio0.20%0.04%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexNASDAQ-100 IndexCRSP US Total Market Index
YTD Return10.61%3.18%
1-Year Return25.70%14.84%
3-Year Return18.19%11.60%
5-Year Return20.55%13.31%
10-Year Return15.39%10.34%
1-Year Tax Cost Ratio0.25%0.43%

VTI profile seeks to track the performance of a benchmark index that measures the investment return of the overall stock market. The Fund employs a "passive management" approach designed to track the performance of the CRSP US Total Market Index.

15. Compare and contrast: QQQ vs XLK.

Both XLK and QQQ track tech stocks.  XLK has fewer stocks (76 vs. 106) but is also cheaper than QQQ.  XLK includes all of the big names in tech but also a few that seem like misfits, such as financial payment processors or telcos.  

QQQ has a higher expense ratio than XLK: 0.20% vs. 0.13%.  Over the last 10 years, QQQ returned more than XLK (15.39% vs. 13.64%)

Below is a comparison between QQQ and XLK.


QQQXLK
SegmentEquity: U.S. - Large CapEquity: U.S. Technology
Net Assets$63.24B$20.70B
Expense Ratio0.20%0.13%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexNASDAQ-100 IndexS&P Technology Select Sector Index
YTD Return10.61%9.36%
1-Year Return25.70%28.73%
3-Year Return18.19%20.83%
5-Year Return20.55%19.89%
10-Year Return15.39%13.64%
1-Year Tax Cost Ratio0.25%0.58%

XLK seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Technology Select Sector Index. Under normal market conditions, the fund generally invests substantially all, but at least 95%, of its total assets in the securities comprising the Index.

16. Compare and contrast: QQQ vs TQQQ.

Both QQQ and TQQQ are US tech ETFs, however, TQQQ is 'on steroids'.  It aims to return 3x the performance of NASDAQ 100.  Needless to say, it's super risky.

TQQQ is also very expensive.  Its expense ratio is 0.95% (vs. QQQ's 0.20%).  Over the last 10 years, QQQ returned more than TQQQ (59.52% vs. 20.55%).

Below is a comparison between QQQ and TQQQ.


QQQTQQQ
SegmentEquity: U.S. - Large CapLeveraged Equity: U.S. - Large Cap
Net Assets$63.24B$3.42B
Expense Ratio0.20%0.95%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexNASDAQ-100 IndexNASDAQ-100 Index
YTD Return10.61%23.51%
1-Year Return25.70%75.44%
3-Year Return18.19%47.69%
5-Year Return20.55%59.52%
10-Year Return15.39%N/A
1-Year Tax Cost Ratio0.25%N/A

TQQQ seeks daily investment results that correspond to three times the daily performance of the NASDAQ-100 Index. The fund invests in equity securities and derivatives. The Index includes 100 of the largest non-financial domestic and international issues listed on the NASDAQ Stock Market.

17. Compare and contrast: QQQ vs VGT.

Both QQQ and VGT and US tech ETFs.  VGT is a much more diverse market-cap-weighted fund that includes over 350 stocks in its portfolio.  Some of them are small- and mid-cap.  QQQ primarily has large-cap tech stocks. 

QQQ has a higher expense ratio than VGT: 0.20% vs. 0.10%.  Over the last 10 years, QQQ returned more than VGT (15.39% vs. 14.34%)

Below is a comparison between QQQ and VGT.


QQQVGT
SegmentEquity: U.S. - Large CapEquity: U.S. Technology
Net Assets$63.24B$19.57B
Expense Ratio0.20%0.10%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexNASDAQ-100 IndexMSCI US Investable Market IT 25/50 Index
YTD Return10.61%10.64%
1-Year Return25.70%30.12%
3-Year Return18.19%21.25%
5-Year Return20.55%21.21%
10-Year Return15.39%14.34%
1-Year Tax Cost Ratio0.25%0.24%

VGT seeks to track the performance of a benchmark index that measures the investment return of information technology stocks.

18. Compare and contrast: QQQ vs SPY.

Both QQQ and SPY are US large caps ETFs.   SPY tracks S&P 500 (and has approximately 500 stocks), whereas QQQ tracks NASDAQ 100 (and includes 106 stocks in its portfolio). 

QQQ has a higher expense ratio than SPY: 0.20% vs. 0.09%.  Over the last 10 years, QQQ returned more than SPY (15.39% vs. 10.06%).

Below is a comparison between QQQ and SPY.


QQQSPY
SegmentEquity: U.S. - Large CapEquity: U.S. - Large Cap
Net Assets$63.24B$278.47B
Expense Ratio0.20%0.09%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexNASDAQ-100 IndexS&P 500
YTD Return10.61%2.52%
1-Year Return25.70%14.28%
3-Year Return18.19%11.86%
5-Year Return20.55%13.30%
10-Year Return15.39%10.06%
1-Year Tax Cost Ratio0.25%0.78%

SPY seeks investment results that, before expenses, generally correspond to the price and yield performance of the component common stocks of the S&P 500 Index.

19. I'd like to compare QQQ to other ETFs and mutual funds.  What's the best way to do this?

Use Finstead's ETF and mutual fund comparison tool.  Type any two funds you'd like to compare, such as VTI vs. QQQ, or QQQ vs. VTSAX.  

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