If you’re weighing SPY vs QQQ, you’ve probably decided to put some of your money into an index fund. For most investors, that’s a sound decision. You’ll get a highly diversified portfolio even with a small investment, and you won’t have to worry about assessing and picking stocks.

But which of these funds is right for you? Let’s take a closer look, starting with the basics.

SPY vs QQQ: By the Numbers

Full NameSPDR S&P 500 ETF TrustInvesco QQQ Trust
Index TrackedS&P 500NASDAQ-100
Assets Under Management*$400.4 billion$154 billion
Number of Holdings505102
Expense Ratio.09%.20%
Dividend Yield*1.51%0.61%
IssuerState Street Global AdvisorsInvesco
* As of Sept. 2023

Five-Year Performance

SPY vs. QQQ Five-Year performance chart

SPY vs QQQ: What’s the Difference?

The most prominent difference between SPY and QQQ is that they track different indices:

  • SPY tracks the S&P 500. The S&P 500 is an index of 503 of the largest companies in the US. The companies represented are listed on the New York Stock Exchange (NYSE), the NASDAQ, and the Chicago Board Options Exchange (CBOE) BZK Exchange.
  • QQQ tracks the NASDAQ-100. The NASDAQ-100 tracks 101 of the largest non-financial stocks trading on the NASDAQ exchange. The NASDAQ is considered a tech-heavy exchange but also includes non-financial companies.

Both of these indices and both ETFs are market cap weighted, which means that they give larger companies a heavier weighting.

SPY vs QQQ: Sector Exposure

SPY and QQQ break down their sector descriptions in slightly different terms.

SPY Sector Breakdown

Information Technology27.16%
Health Care13.41%
Consumer Discretionary10.70%
Communication Services8.80%
Consumer Discretionary6.68%
Real Estate2.40%

QQQ Sector Breakdown

Consumer Discretionary18.67%
Health Care7.07%
Consumer Staples4.46%
Real Estate0.3%
Basic Materials0.27%

One thing that immediately stands out in these breakdowns is that QQQ is heavily concentrated in the technology and consumer discretionary sectors. Both of these sectors tend to outperform during bull markets but may experience significant drops during bear markets.

Tracking different indices is the fundamental difference in the SPY vs QQQ equation.

  • SPY tracks a larger number of companies from a wider range of corporate sectors. That means it’s more diversified, has a higher dividend (tech companies often do not pay dividends), and could be considered a more defensive position, less likely to lose in down markets.
  • QQQ tracks a smaller number of companies with a greater concentration in tech. That makes the ETF more likely to outperform in expansionary conditions, when tech tends to outperform, and also makes it a greater risk in bear markets when high-flying tech companies have further to fall.

Neither of these options is fundamentally better or worse. They provide exposure to slightly different sectors of the market, and that leads to different performance characteristics.

SPY vs QQQ: The Similarities

SPY and QQQ have a lot in common. SPY is the largest single ETF trading on US markets, and QQQ is the 5th largest. They rank as the first and second-most traded funds in the country by average daily volume.

Both funds are managed by large investment firms with extensive track records: SPY by State Street Global Advisors and QQQ by Invesco. If you’re looking for large, highly liquid funds with credible management, both of these ETFs will pass your screen.

There are also less obvious similarities, stemming from three basic facts:

  1. Many companies that trade on the NASDAQ are part of the S&P 500.
  2. Major tech firms from the NASDAQ are among the largest companies in the US.
  3. Both the S&P 500 and the NASDAQ-100 – and the funds that track them – are weighted by market cap.

What does that mean in practice? Let’s look at the ten largest holdings of SPY and QQQ.

Top Holdings: SPY vs QQQ

Apple Inc (7.1%)Apple Inc (11.04%)
Microsoft Corp (6.51%)Microsoft Corp (9.51%)
Amazon.com Inc (3.24%)Amazon.com Inc (5.38%)
NVIDIA Corp (2.84%)NVIDIA Corp (4.15%)
Alphabet Inc Class A (2.14%)Meta Platforms Inc Class A (3.76%)
Tesla Inc (1.87%)Tesla Inc (3.14%)
Meta Platforms Inc Class A (1.84%)Alphabet Inc Class A (3.12%)
Alphabet Inc Class CAlphabet Inc Class C (3.08%)
Berkshire Hathaway Inc Cass B (1.81%)Broadcom Inc (2.96%)
United Health Group Inc (1.3%)Costco Wholesale Group (2.15%)

Those are very similar lists, with all but two companies appearing on both sides in very similar order. QQQ has higher concentrations in these companies, as expected from a fund with fewer holdings overall.

If the holdings are so similar what makes these funds different? The answer is simply that after the top ten, the holdings diverge substantially. Let’s look at the next ten holdings for each fund.

ExxonMobil Corp (1.27%)PepsiCo Inc (2.09%)
Eli Lilly and Company (1.21%)Adobe Inc (2.04%
JP Morgan Chase & Co (1.17%)Cisco Systems Inc (1.89%)
Johnson & Johnson (1.07%)Comcast Corp Class A (1.61%)
Visa Inc (1.04%)Netflix Inc (1.46%)
The Procter & Gamble Company (0.99%)T-Mobile US Inc (1.42%)
Broadcom Inc (0.95%)Advanced Micro Devices Inc (1.35%)
Mastercard Incorporated (0.92%)Texas Instruments Ince (1.26%)
The Home Depot Inc (0.85%)Amgen Inc (1.24%)
Chevron Corporation (0.82%)Intel Corp (1.24%)

Here we start to see a real divergence in the holdings of the two funds. We also see the greater diversification of SPY: the QQQ list is still dominated by tech, while SPY has a strong presence in industries like energy, financials, and pharmaceuticals.

Which Is Best for You?

Both SPY and QQQ are solid choices for an investor who is looking for a quality index fund. Both are among the largest and most prominent ETFs in the country, and both are highly liquid.

Your choice will be based on what you are looking for in an investment.

  • SPY is a relatively conservative, highly diversified ETF with very low management costs, a higher dividend yield, and less potential for dramatic losses during a market downturn.
  • QQQ is a more aggressive, less diversified fund focused on major tech companies. This gives it greater potential for gains in bull market periods but also opens up the possibility of significant losses in a bear market.

How you see the markets makes a difference: if you think markets are set for an expansionary phase, QQQ would be a better choice. If you see potential for a market turndown and you want to minimize costs and risks, SPY might be your ETF of choice.

If you are weighing SPY vs QQQ and you’re having trouble making up your mind, consider allocating a portion of your portfolio to each fund. Keeping several ETFs in your portfolio can provide the best of both worlds!

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