Comparing Two of the Top Buy-and-Hold ETFs for Retail Investors: QQQ vs. VOO

The Invesco QQQ Trust, Series 1 (QQQ) stands out for its tech-heavy focus and recent performance, while the Vanguard S&P 500 ETF (VOO) offers broader diversification, lower fees, and a higher yield.

Both QQQ and VOO are among the most popular exchange-traded funds in the U.S., but they serve different investment priorities. QQQ tracks the NASDAQ-100 Index and emphasizes large-cap technology, while VOO tracks the S&P 500 Index, representing the broader U.S. stock market. Here’s how they compare on cost, returns, risk, and what’s inside.

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.

VOO looks more affordable with its 0.03% expense ratio, undercutting QQQ’s 0.20% fee, and also stands out for a higher dividend yield, which could appeal to investors seeking income alongside growth.

Performance & Risk Comparison

What's Inside

VOO tracks the S&P 500 Index, holding 505 companies and offering exposure across sectors: 36% in technology, 13% in financial services, and 11% in consumer cyclicals. Its top positions include NVIDIA (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT), each representing less than 0.1% of the fund. With over 15 years in the market, VOO may appeal to investors seeking broad, low-cost coverage of the U.S. large-cap universe.

In contrast, QQQ provides a more concentrated bet on large-cap growth, with 54% in technology, 17% in communication services, and 13% in consumer cyclicals. Its largest holdings—NVIDIA, Apple, and Microsoft—carry slightly higher individual weights than in VOO. QQQ’s narrower focus means greater sensitivity to tech sector swings, while VOO’s breadth spreads risk more widely.

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Foolish Take

Simply put, these are two of my favorite ETFs. The Invesco QQQ Trust, Series 1 (QQQ) and the Vanguard S&P 500 ETF (VOO) are both compelling investment options, but let's break down what makes each one stand out.

To start, let's focus on one key difference: Each fund's expense ratio. The QQQ has an expense ratio of 0.20%, which is reasonable and below the average ETF expense ratio of around 0.45%. However, the VOO offers a rock-bottom expense ratio of 0.03%. That's about as low of an expense ratio as you'll ever see, and it gives the VOO the edge in this key category.

Second, let's examine performance and composition. The QQQ is more heavily weighted to megacap tech stocks. That has its benefits and drawbacks. In the long term, its concentration in technology stocks has powered the QQQ's excellent performance history. The QQQ boasts a 10-year compound annual growth rate (CAGR) of 19.2% -- easily besting the VOO's CAGR of 14.4%. Yet, on the other side of the ledger, QQQ's heavy concentration of big tech stocks makes it more volatile during market corrections and bear markets. The QQQ's max five-year drawdown of -35% is significantly steeper than the VOO's -24%.

In sum, both of these ETFs are excellent choices for just about any investment portfolio. Perhaps the only significant downside to these ETFs are their meager dividend yields (1.1% for VOO and 0.5% for QQQ), which may cause income-oriented investors to look elsewhere. Otherwise, these ETFs' broad diversification, low expense ratios, and excellent long-term performance history make them ETFs that every investor should know.

Glossary

ETF (Exchange-Traded Fund): An investment fund traded on stock exchanges, holding a basket of assets like stocks or bonds.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: The annual dividends paid by a fund or stock, expressed as a percentage of its price.
Beta: A measure of an investment’s volatility compared to the overall market, typically the S&P 500.
AUM (Assets Under Management): The total market value of assets that a fund manages on behalf of investors.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Growth of $1,000: The increase in value of a $1,000 investment over a given time, including price changes and dividends.
Large-cap: Companies with a large market capitalization, generally considered stable and established.
Sector: A group of companies that operate in the same area of the economy, such as technology or financial services.
Index: A statistical measure representing a group of stocks, used to track market performance (e.g., S&P 500, NASDAQ-100).
Diversification: Spreading investments across various assets or sectors to reduce risk.
Drawdown: A decline in investment value from its peak to its lowest point before recovering.

Jake Lerch has positions in Invesco QQQ Trust and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.