QQQ vs. SPY: QQQ Has Delivered Superior Gains, But It Comes With Higher Risk

State Street SPDR S&P 500 ETF Trust (NYSEMKT:SPY) and Invesco QQQ Trust, Series 1 (NASDAQ:QQQ) differ most in sector concentration, risk profile, and cost, with QQQ charging a higher fee and focusing more on technology stocks.

Both the State Street SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust, Series 1 (QQQ) are giants among United States exchange-traded funds, each tracking a large-cap index but with distinct portfolios and risk-return tradeoffs. This comparison outlines how the two ETFs stack up on cost, performance, sector tilts, liquidity, and portfolio construction to help investors evaluate which may better fit their strategy.

Snapshot (Cost & Size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

SPY looks more affordable, charging about half the annual expense ratio of QQQ, while also offering a higher dividend yield. QQQ’s higher fee and lower payout may matter to cost-focused or income-oriented investors.

Performance & Risk Comparison

What's Inside

QQQ tracks the NASDAQ-100 Index, tilting heavily toward technology (55% of assets), with communication services and consumer cyclical sectors making up most of the rest. The fund holds 102 stocks, with the largest allocations to NVIDIA Corp (NASDAQ:NVDA) (8.46%), Apple Inc (NASDAQ:AAPL) (7.69%), and Microsoft Corp (NASDAQ:MSFT) (5.90%). Launched in March 1999, QQQ has a track record of nearly 27 years and is known for its tech concentration, which can amplify both gains and losses.

SPY, by contrast, tracks the S&P 500 and offers broader diversification across 502 companies, with technology, financial services, and communication services as its top sectors. Its biggest holdings are Nvidia Corp (7.42%), Apple Inc (6.74%), and Microsoft Corp (5.17%). This broader sector spread can help smooth volatility compared to QQQ’s more concentrated approach.

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What This Means For Investors

State Street SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust, Series 1 (QQQ) are two of the best-known and most well-regarded exchange-traded funds (ETFs) around. Here are the key takeaways for everyday investors.

First off, the size of these two funds should be noted. SPY has more than $700 billion in AUM; QQQ has over $400 billion. In other words, these funds are massive, and, in many ways, they are the benchmark ETFs on Wall Street. SPY tracks the S&P 500, while QQQ tracks the Nasdaq 100. Both funds are heavily exposed to the big tech giants — Nvidia, Microsoft, Alphabet, Apple, Amazon, and Meta Platforms.

Because of this deep exposure to big tech, the funds tend to move similarly, although not perfectly, in tandem. Over the last three years, SPY has advanced by 73%, while QQQ has generated a total return of 101%. Yet, while QQQ has delivered the higher return, it does appear to come with elevated risk, too. QQQ experienced a more significant drawdown of 35% versus 24% for SPY.

At any rate, both of these ETFs are a fit for the majority of investment portfolios. Those investors willing to accept greater risk may opt for QQQ, while those seeking more stability may favor SPY. In either case, investors get exposure to a wide swath of the stock market with an emphasis on big tech.

Jake Lerch has positions in Alphabet, Amazon, Invesco QQQ Trust, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.