VOOG: Is This Vanguard ETF a Better Way to Buy the Nasdaq-100?

If you want to buy America's most prominent tech stocks, one of the easiest ways to do that is to buy the Invesco QQQ Trust (NASDAQ: QQQ). This fund tracks the tech-heavy Nasdaq-100 index, so it gives you exposure to all the major tech names driving the artificial intelligence (AI) boom. And this tech ETF is so well-regarded and popular that it's known by its nickname: "The Qs."

In the past 10 years, the ETF has delivered average annual returns of 21.1%. This fund has outperformed the S&P 500 index 88% of the time during the past 10 years. Why would anyone buy anything else?

Some investors might not want to buy the Qs but still want exposure to major tech stocks. Some investors might not have access to the Qs through their retirement plan or brokerage account platform. If you want an alternative to buying the Invesco QQQ Trust, Vanguard offers a low-cost index fund called the Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG), which could be a good choice.

Image source: Getty Images.

Let's look at the Vanguard S&P 500 Growth ETF and see if it could take the place of the Qs in your portfolio.

Vanguard S&P 500 Growth ETF: 145 stocks, 16.7% annualized returns for 15 years

When you buy the Vanguard S&P 500 Growth ETF, you're not exactly buying the Nasdaq-100 index. This fund holds 145 stocks, instead of 102 in the Qs. And the Vanguard ETF is not as tech-heavy as the Invesco QQQ Trust.

The Vanguard S&P 500 Growth ETF is also not a typical S&P 500 ETF. Instead of tracking the entire S&P 500, it only invests in the Standard & Poor's 500 Growth Index, made up of stocks that are expected to offer high potential for investment growth.

As of April 30, this fund has delivered average annual returns (by net asset value) of 26.9% over the past three years, 14.15% over the past five years, and 17.6% over the past 10 years. Since the fund's inception in September 2010, it has delivered annualized returns of 16.7%.

For most of the past year, the Vanguard S&P 500 Growth ETF's performance has tracked fairly closely to the Qs. But in late April, with the recent tech rally, the Invesco ETF started to outpace the Vanguard fund. The Qs have gained 42% in the past year, while the Vanguard S&P 500 Growth ETF is up 35.2%.

QQQ data by YCharts

The Qs have outperformed even more strongly over a longer five-year time frame. The Invesco QQQ Trust has delivered a five-year cumulative return of 103.8% (by net asset value), compared with 93.8% for the Vanguard S&P 500 Growth ETF.

This shows how hard it is to outperform the Qs. The Vanguard S&P 500 Growth ETF has almost doubled in value in the past five years -- and investors would still have earned a better return from the Invesco QQQ Trust.

VOOG vs. QQQ: Head-to-head comparison

While 63.6% of the Invesco QQQ Trust ETF's assets are in technology sector stocks, only 49.2% of the Vanguard ETF's holdings are in tech. Here are the top five sector holdings in the Vanguard S&P 500 Growth ETF, and how they compare to the Qs:

Data sources: Vanguard, Invesco.

Both funds offer exposure to most of the same major tech names, but at slightly different levels of concentration. The top five stock holdings in each fund are:

Data sources: Vanguard, Invesco

What about dividends, price to earnings (P/E) ratios, and expenses? Here's a quick breakdown of those key metrics:

Data source: Yahoo! Finance.

The Vanguard S&P Growth ETF is a slightly lower-cost index fund, but the Invesco QQQ Trust has achieved such strong outperformance that it could be worth paying an extra 11 basis points. Neither of these funds pays huge dividends, but that's typical for growth stocks. And the Vanguard fund might look slightly cheaper based on the earnings multiple, but probably not enough to outweigh the upside of the Qs.

Why buy the Qs instead of VOOG?

I'm usually a big fan of Vanguard ETFs, but in this case, I would recommend buying the non-Vanguard fund. If you want to buy tech stocks, the Invesco QQQ Trust might be too hard to beat.

If you want to get away from tech stocks by buying a more diversified, low-cost index fund to invest in different parts of the market, other Vanguard ETFs can be good for that purpose. But if you really just want the top 100 largest non-financial companies on the Nasdaq, buy the Qs.

Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Broadcom, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.