Should You Buy QQQ or VUG Right Now? Here's What History Suggests.

The Invesco QQQ ETF (NASDAQ: QQQ) is one of the market's best-performing exchange-traded funds (ETFs) of the past 15 years, earning an annual average of 20% over that time frame. That would seemingly make it an easily defensible choice to add to your portfolio.

The Vanguard Growth ETF (NYSEMKT: VUG), however, has put up a pretty strong track record of its own. Its 15-year average annual return has been a modestly lower 17.5%, but I'd argue that it might be better positioned for future growth.

For me, the choice between two seemingly similar ETFs comes down to the investment strategy. How are the portfolios being built, and is that construction smart? Can these portfolios deliver on their objective, and will they do it in a way that's sensible and logical?

With these two funds, the decision has less to do with historical performance and more to do with whether you're getting what you think you're getting.

Source: Getty Images.

QQQ: Great track record with a curious strategy

The Invesco QQQ ETF tracks the Nasdaq-100 index. Its strategy is very simple: invest in the 100 largest non-financial stocks traded on the Nasdaq (NASDAQ: NDAQ) exchange.

Many people don't mind that strategy because of its performance. A lot of the major tech companies have chosen to list on the Nasdaq, so the Nasdaq-100 index becomes very top-heavy and saturated with tech stocks. It gives this fund the impression that it's a tech ETF, but that's more by pure coincidence than anything.

While Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) are the fund's biggest holdings, it's some of the stocks further down the list that show what a mixed bag this index really is.

Also in the portfolio are Walmart (NASDAQ: WMT), Costco Wholesale (NASDAQ: COST), Amgen (NASDAQ: AMGN), Linde (NASDAQ: LIN), T-Mobile (NASDAQ: TMUS), and PepsiCo (NASDAQ: PEP). That's two big-box retailers, a biotech, a chemical company, a telecom, and a consumer goods manufacturer.

You don't see that in too many "tech" ETFs.

VUG: A lot of the same winners with a defined strategy

The Vanguard Growth ETF uses a much more logical approach. It uses six different fundamental metrics -- some backward-looking, some forward-looking -- to identify and invest in some of the fastest-growing companies in the United States.

With the artificial intelligence (AI) boom over the past several years, tech stocks, unsurprisingly, dominate this fund as well. Currently, around 70% of the portfolio comes from this group. And that doesn't even count tech-adjacent names like Amazon (NASDAQ: AMZN) and Tesla (NASDAQ: TSLA).

The difference between this fund and the Invesco QQQ ETF is that the Vanguard Growth ETF's tech exposure is purposeful. AI is what's driving economic growth right now. But if that trend changes and growth begins coming from other areas, the portfolio will evolve to reflect that. Using fundamentals in the selection process will capture growth exposure wherever it comes from. The Invesco QQQ ETF will be stuck with the same names and same exposures.

History favors QQQ, but I'd buy VUG instead

The QQQ vs. VUG debate is a really good example of why it's important to look under the hood of your ETF.

To be fair, the Vanguard Growth ETF will usually be tilted toward tech because that's where much of the innovation is coming from. But it can also adapt as conditions change. That's what I want to see from my investments.

There's no real logic to buying a basket of stocks solely based on the exchange in which they trade. As we saw above, it's a real mish-mash of sectors once you get past the tech heavyweights at the top. And barring a new entrant into the top 100, such as Anthropic, this portfolio's composition probably won't change much.

The Invesco QQQ ETF definitely has the track record. But I prefer the Vanguard Growth ETF because of how the portfolio is built.

David Dierking has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Amgen, Apple, Costco Wholesale, Microsoft, Nvidia, Tesla, Vanguard Morningstar Growth ETF, and Walmart. The Motley Fool recommends Linde, Nasdaq, and T-Mobile US. The Motley Fool has a disclosure policy.