The Schwab US Broad Market ETF (SCHB) and the Vanguard Total Stock Market ETF (VTI) are two of the largest ETFs and are sponsored by Schwab and Vanguard respectively. SCHB and VTI are a core holding of many investor portfolios and many investors compare SCHB vs VTI in order to decide which should be the foundation of their portfolio.

The Short Answer

Although VTI and SCHB track different indices, the risk and return between these two funds is identical and I consider them interchangeable.

A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.

The Long Answer

Historical Performance: VTI vs SCHB

VTI was launched in 2001, while SCHB was launched nearly a decade later in 2009. Since then, performance has been identical (as the performance chart below illustrates). The annualized difference in returns is just .02%, which speaks to the similarities in holdings and exposures. The cumulative performance differential over the past two decades is about 1.5%.

Differences between VTI vs SCHB

SCHB tracks the Dow Jones US Broad Market Index, while VTI tracks the CRSP US Total Market Index. However these two indices are basically identical.

Geographic Exposure

Both SCHB and VTI hold essentially 100% US stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical exposures.

Market Cap Exposure

As the below table shows, the market cap exposure of these two “total market” (meaning they hold large, mid, and small-caps) is identical.

	SCHB	VTI
Large-Cap	73%	72%
Mid-Cap	19%	20%
Small-Cap	8%	9%

Sector Weights

The sector weights between SCHB and VTI are nearly identical, which is to be expected given the identical performance.

	SCHB	VTI
Basic Materials	2.47%	2.56%
Consumer Cyclical	10.61%	10.39%
Financial Services	12.53%	12.79%
Real Estate	3.14%	3.29%
Communication Services	8.04%	7.61%
Energy	4.40%	4.58%
Industrials	8.98%	9.34%
Technology	26.69%	25.46%
Consumer Defensive	6.49%	6.73%
Healthcare	14.01%	14.44%
Utilities	2.65%	2.80%

Expenses

The expense ratio for both funds is .03%, which extremely low.

Transaction Costs

ETFs are free to trade at many brokers and custodians, so both SCHB and VTI should be free to trade in most cases. Additionally, these funds are among the largest ETFs and are very liquid. The bid-ask spread of both SCHB and VTI is about .01%, so individual investor trades will not generally be large enough to “move” the market.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Neither VTI nor SCHB has never made a capital gains distribution (and I do not expect them to moving forward). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Final Thoughts: VTI vs SCHB

Both SCHB and VTI are large, core funds sponsored and managed by two of the largest investment sponsors in the world. Performance has been extremely similar.

I view these two funds as essentially interchangeable and would not spend any energy splitting hairs to decide which one is “better.” In my opinion, both funds are among the best ETFs out there and investors cannot really go wrong with either.

VOO and QQQ are two of the most popular ETFs in the market. Given their popularity, many people compare VOO vs QQQ and/or ask which fund is a better investment.

My answer to these types of questions is that VOO and QQQ are very different and not necessarily comparable. So rather than write a long post about similarities and differences between VOO and QQQ, I’ll provide a framework for thinking about VOO vs QQQ.

My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).

Types of Investors

There are a few reasons that someone might want to know whether VOO or QQQ is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.

New Investors

Even though VOO and QQQ are not necessarily comparable, individual investors may not necessarily understand that the funds are different or what differences really matter. New investors may want to just skip to the bottom of this post.

Average Investors

Some investors may understand that VOO and QQQ are quite different, but may be interested in selecting the one that they believe will perform the best. My response to these investors is that portfolio construction should be based on a target asset allocation (based on risk tolerance, time horizon, liquidity needs, and so on). Once an allocation is selected, then investors can select the best vehicle for each slice of the portfolio allocation. If an investor decides on an asset allocation before selecting investments (as they should!), then the question of VOO vs QQQ will never come up since they fill different roles in a portfolio.

Day Traders

There are some people who think that they can trade in and out of VOO, QQQ, and other investments profitably. To those people, I’d say the research, evidence, and odds are stacked against you but good luck!

VOO vs QQQ: Holdings & Exposures

VOO and QQQ are not comparable because their underlying holdings are so different. An investor’s preference for VOO or QQQ will depend on its role in the portfolio.

Both funds primarily hold stocks, but the composition and exposures of their holdings is very different. Although both VOO and QQQ are large-cap funds, QQQ is much more concentrated in terms of number of companies (100 vs 500) and sectors. This sector concentration results in higher risk, which has resulted in much higher volatility and returns (relative to VOO).

Given the above, I believe any investor can use VOO as a core (or even only) portfolio holding. However, I would never recommend that for QQQ. At best, it could be a satellite or complementary position. Interested readers may want to read my review of VOO.

VOO vs QQQ: Performance, Expenses, & Risk

I could compare VOO and QQQ’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.

Historical Performance

Since VOO and QQQ have very different holdings and exposures, comparing historical performance is meaningless. One fund will outperform over certain time periods and the other will outperform over other time periods. I am not going to delve into a performance comparison and attribution, since we already know that the funds are very different. Readers who really want this information can check out tools like Morningstar.com.

Expenses

Again, any performance difference caused by the expense ratios of VOO and QQQ will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but VOO and QQQ are not equal at all!

Risk & Volatility

The two funds are very different, but I will comment on risk and volatility since it informs my view on how these funds should be used.

QQQ is riskier than VOO, measured by both realized volatility and drawdowns. This is because QQQ is more concentrated and less diversified. This is true both for realized volatility (see below) and maximum drawdowns. QQQ does not always underperform during market stress, but the lack of diversification leaves it vulnerable (such as the dot com crash when it lost over 80% of its value).

ETF Benefits

Both VOO and QQQ are exchange-traded funds (ETFs), which do have some advantages for investors.

Tax Efficiency

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Tradability

ETFs are free to trade on many platforms and investors should have no problem trading VOO or QQQ, which are large and liquid.

Alternative Vehicles

Investors limited to mutual funds should have no problem finding a mutual fund version of VOO or a mutual fund version of QQQ.

Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate VOO or QQQ easily.

What Would I Do: VOO or QQQ?

In my opinion, VOO is an appropriate core holding for most portfolios, while QQQ is not. However, I think QQQ could potentially be a satellite holding for some investors.

IVV and QQQ are two of the most popular ETFs in the market. Given their popularity, many people compare IVV vs QQQ and/or ask which fund is a better investment.

My answer to these types of questions is that IVV and QQQ are very different and not necessarily comparable. So rather than write a long post about similarities and differences between IVV and QQQ, I’ll provide a framework for thinking about IVV vs QQQ.

My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).

Types of Investors

There are a few reasons that someone might want to know whether IVV or QQQ is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.

New Investors

Even though IVV and QQQ are not necessarily comparable, individual investors may not necessarily understand that the funds are different or what differences really matter. New investors may want to just skip to the bottom of this post.

Average Investors

Some investors may understand that IVV and QQQ are quite different, but may be interested in selecting the one that they believe will perform the best. My response to these investors is that portfolio construction should be based on a target asset allocation (based on risk tolerance, time horizon, liquidity needs, and so on). Once an allocation is selected, then investors can select the best vehicle for each slice of the portfolio allocation. If an investor decides on an asset allocation before selecting investments (as they should!), then the question of IVV vs QQQ will never come up since they fill different roles in a portfolio.

Day Traders

There are some people who think that they can trade in and out of IVV, QQQ, and other investments profitably. To those people, I’d say the research, evidence, and odds are stacked against you but good luck!

IVV vs QQQ: Holdings & Exposures

IVV and QQQ are not comparable because their underlying holdings are so different. An investor’s preference for IVV or QQQ will depend on its role in the portfolio.

Both funds primarily hold stocks, but the composition and exposures of their holdings is very different. Although both IVV and QQQ are large-cap funds, QQQ is much more concentrated in terms of number of companies (100 vs 500) and sectors. This sector concentration results in higher risk, which has resulted in much higher volatility and returns (relative to IVV).

Given the above, I believe any investor can use IVV as a core (or even only) portfolio holding. However, I would never recommend that for QQQ. At best, it could be a satellite or complementary position.

IVV vs QQQ: Performance, Expenses, & Risk

I could compare IVV and QQQ’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.

Historical Performance

Since IVV and QQQ have very different holdings and exposures, comparing historical performance is meaningless. One fund will outperform over certain time periods and the other will outperform over other time periods. I am not going to delve into a performance comparison and attribution, since we already know that the funds are very different. Readers who really want this information can check out tools like Morningstar.com.

Expenses

Again, any performance difference caused by the expense ratios of IVV and QQQ will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but IVV and QQQ are not equal at all!

Risk & Volatility

The two funds are very different, but I will comment on risk and volatility since it informs my view on how these funds should be used.

QQQ is riskier than IVV, measured by both realized volatility and drawdowns. This is because QQQ is more concentrated and less diversified. This is true both for realized volatility (see below) and maximum drawdowns. QQQ does not always underperform during market stress, but the lack of diversification leaves it vulnerable (such as the dot com crash when it lost over 80% of its value).

ETF Benefits

Both IVV and QQQ are exchange-traded funds (ETFs), which do have some advantages for investors.

Tax Efficiency

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Tradability

ETFs are free to trade on many platforms and investors should have no problem trading IVV or QQQ, which are large and liquid.

Alternative Vehicles

Investors limited to mutual funds should have no problem finding a mutual fund version of IVV or a mutual fund version of QQQ.

Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate IVV or QQQ easily.

What Would I Do: IVV or QQQ?

In my opinion, IVV is an appropriate core holding for most portfolios, while QQQ is not. However, I think QQQ could potentially be a satellite holding for some investors.

SPY and QQQ are two of the most popular ETFs in the market. Given their popularity, many people compare SPY vs QQQ and/or ask which fund is a better investment.

My answer to these types of questions is that SPY and QQQ are very different and not necessarily comparable. So rather than write a long post about similarities and differences between SPY and QQQ, I’ll provide a framework for thinking about SPY vs QQQ.

My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).

Types of Investors

There are a few reasons that someone might want to know whether SPY or QQQ is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.

New Investors

Even though SPY and QQQ are not necessarily comparable, individual investors may not necessarily understand that the funds are different or what differences really matter. New investors may want to just skip to the bottom of this post.

Average Investors

Some investors may understand that SPY and QQQ are quite different, but may be interested in selecting the one that they believe will perform the best. My response to these investors is that portfolio construction should be based on a target asset allocation (based on risk tolerance, time horizon, liquidity needs, and so on). Once an allocation is selected, then investors can select the best vehicle for each slice of the portfolio allocation. If an investor decides on an asset allocation before selecting investments (as they should!), then the question of SPY vs QQQ will never come up since they fill different roles in a portfolio.

Day Traders

There are some people who think that they can trade in and out of SPY, QQQ, and other investments profitably. To those people, I’d say the research, evidence, and odds are stacked against you but good luck!

SPY vs QQQ: Holdings & Exposures

SPY and QQQ are not comparable because their underlying holdings are so different. An investor’s preference for SPY or QQQ will depend on its role in the portfolio.

Both funds primarily hold stocks, but the composition and exposures of their holdings is very different. Although both SPY and QQQ are large-cap funds, QQQ is much more concentrated in terms of number of companies (100 vs 500) and sectors. This sector concentration results in higher risk, which has resulted in much higher volatility and returns (relative to SPY).

Given the above, I believe any investor can use SPY as a core (or even only) portfolio holding. However, I would never recommend that for QQQ. At best, it could be a satellite or complementary position.

SPY vs QQQ: Performance, Expenses, & Risk

I could compare SPY and QQQ’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.

Historical Performance

Since SPY and QQQ have very different holdings and exposures, comparing historical performance is meaningless. One fund will outperform over certain time periods and the other will outperform over other time periods. I am not going to delve into a performance comparison and attribution, since we already know that the funds are very different. Readers who really want this information can check out tools like Morningstar.com.

Expenses

Again, any performance difference caused by the expense ratios of SPY and QQQ will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but SPY and QQQ are not equal at all!

Risk & Volatility

The two funds are very different, but I will comment on risk and volatility since it informs my view on how these funds should be used.

QQQ is riskier than SPY, measured by both realized volatility and drawdowns. This is because QQQ is more concentrated and less diversified. This is true both for realized volatility (see below) and maximum drawdowns. QQQ does not always underperform during market stress, but the lack of diversification leaves it vulnerable (such as the dot com crash when it lost over 80% of its value).

ETF Benefits

Both SPY and QQQ are exchange-traded funds (ETFs), which do have some advantages for investors.

Tax Efficiency

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Tradability

ETFs are free to trade on many platforms and investors should have no problem trading SPY or QQQ, which are large and liquid.

Alternative Vehicles

Investors limited to mutual funds should have no problem finding a mutual fund version of SPY or a mutual fund version of QQQ.

Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate SPY or QQQ easily.

What Would I Do: SPY or QQQ?

In my opinion, SPY is an appropriate core holding for most portfolios, while QQQ is not. However, I think QQQ could potentially be a satellite holding for some investors.

SPTM and QQQ are two of the most popular ETFs in the market. Given their popularity, many people compare SPTM vs QQQ and/or ask which fund is a better investment.

My answer to these types of questions is that SPTM and QQQ are very different and not necessarily comparable. So rather than write a long post about similarities and differences between SPTM and QQQ, I’ll provide a framework for thinking about SPTM vs QQQ.

My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).

Types of Investors

There are a few reasons that someone might want to know whether SPTM or QQQ is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.

New Investors

Even though SPTM and QQQ are not necessarily comparable, individual investors may not necessarily understand that the funds are different or what differences really matter. New investors may want to just skip to the bottom of this post.

Average Investors

Some investors may understand that SPTM and QQQ are quite different, but may be interested in selecting the one that they believe will perform the best. My response to these investors is that portfolio construction should be based on a target asset allocation (based on risk tolerance, time horizon, liquidity needs, and so on). Once an allocation is selected, then investors can select the best vehicle for each slice of the portfolio allocation. If an investor decides on an asset allocation before selecting investments (as they should!), then the question of SPTM vs QQQ will never come up since they fill different roles in a portfolio.

Day Traders

There are some people who think that they can trade in and out of SPTM, QQQ, and other investments profitably. To those people, I’d say the research, evidence, and odds are stacked against you but good luck!

SPTM vs QQQ: Holdings & Exposures

SPTM and QQQ are not comparable because their underlying holdings are so different. An investor’s preference for SPTM or QQQ will depend on its role in the portfolio.

Both funds primarily hold stocks, but the composition and exposures of their holdings is very different. SPTM is a total market fund, which means that it owns companies of all sizes (although cap-weighted index funds such as SPTM are heavily weighted towards large-caps). QQQ is a large-cap fund that focuses on a narrow set of sectors. This sector concentration results in higher risk, which has resulted in much higher volatility and returns (relative to SPTM).

Given the above, I believe any investor can use SPTM as a core (or even only) portfolio holding. However, I would never recommend that for QQQ. At best, it could be a satellite or complementary position.

SPTM vs QQQ: Performance, Expenses, & Risk

I could compare SPTM and QQQ’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.

Historical Performance

Since SPTM and QQQ have very different holdings and exposures, comparing historical performance is meaningless. One fund will outperform over certain time periods and the other will outperform over other time periods. I am not going to delve into a performance comparison and attribution, since we already know that the funds are very different. Readers who really want this information can check out tools like Morningstar.com.

Expenses

Again, any performance difference caused by the expense ratios of SPTM and QQQ will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but SPTM and QQQ are not equal at all!

Risk & Volatility

The two funds are very different, but I will comment on risk and volatility since it informs my view on how these funds should be used.

QQQ is riskier than SPTM, measured by both realized volatility and drawdowns. This is because QQQ is more concentrated and less diversified. This is true both for realized volatility (see below) and maximum drawdowns. QQQ does not always underperform during market stress, but the lack of diversification leaves it vulnerable (such as the dot com crash when it lost over 80% of its value).

ETF Benefits

Both SPTM and QQQ are exchange-traded funds (ETFs), which do have some advantages for investors.

Tax Efficiency

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Tradability

ETFs are free to trade on many platforms and investors should have no problem trading SPTM or QQQ, which are large and liquid.

Alternative Vehicles

Investors limited to mutual funds should have no problem finding a mutual fund version of SPTM or a mutual fund version of QQQ.

Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate SPTM or QQQ easily.

What Would I Do: SPTM or QQQ?

In my opinion, SPTM is an appropriate core holding for most portfolios, while QQQ is not. However, I think QQQ could potentially be a satellite holding for some investors.

SCHB and QQQ are two of the most popular ETFs in the market. Given their popularity, many people compare SCHB vs QQQ and/or ask which fund is a better investment.

My answer to these types of questions is that SCHB and QQQ are very different and not necessarily comparable. So rather than write a long post about similarities and differences between SCHB and QQQ, I’ll provide a framework for thinking about SCHB vs QQQ.

My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).

Types of Investors

There are a few reasons that someone might want to know whether SCHB or QQQ is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.

New Investors

Even though SCHB and QQQ are not necessarily comparable, individual investors may not necessarily understand that the funds are different or what differences really matter. New investors may want to just skip to the bottom of this post.

Average Investors

Some investors may understand that SCHB and QQQ are quite different, but may be interested in selecting the one that they believe will perform the best. My response to these investors is that portfolio construction should be based on a target asset allocation (based on risk tolerance, time horizon, liquidity needs, and so on). Once an allocation is selected, then investors can select the best vehicle for each slice of the portfolio allocation. If an investor decides on an asset allocation before selecting investments (as they should!), then the question of SCHB vs QQQ will never come up since they fill different roles in a portfolio.

Day Traders

There are some people who think that they can trade in and out of SCHB, QQQ, and other investments profitably. To those people, I’d say the research, evidence, and odds are stacked against you but good luck!

SCHB vs QQQ: Holdings & Exposures

SCHB and QQQ are not comparable because their underlying holdings are so different. An investor’s preference for SCHB or QQQ will depend on its role in the portfolio.

Both funds primarily hold stocks, but the composition and exposures of their holdings is very different. SCHB is a total market fund, which means that it owns companies of all sizes (although cap-weighted index funds such as SCHB are heavily weighted towards large-caps). QQQ is a large-cap fund that focuses on a narrow set of sectors. This sector concentration results in higher risk, which has resulted in much higher volatility and returns (relative to SCHB).

Given the above, I believe any investor can use SCHB as a core (or even only) portfolio holding. However, I would never recommend that for QQQ. At best, it could be a satellite or complementary position.

SCHB vs QQQ: Performance, Expenses, & Risk

I could compare SCHB and QQQ’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.

Historical Performance

Since SCHB and QQQ have very different holdings and exposures, comparing historical performance is meaningless. One fund will outperform over certain time periods and the other will outperform over other time periods. I am not going to delve into a performance comparison and attribution, since we already know that the funds are very different. Readers who really want this information can check out tools like Morningstar.com.

Expenses

Again, any performance difference caused by the expense ratios of SCHB and QQQ will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but SCHB and QQQ are not equal at all!

Risk & Volatility

The two funds are very different, but I will comment on risk and volatility since it informs my view on how these funds should be used.

QQQ is riskier than SCHB, measured by both realized volatility and drawdowns. This is because QQQ is more concentrated and less diversified. This is true both for realized volatility (see below) and maximum drawdowns. QQQ does not always underperform during market stress, but the lack of diversification leaves it vulnerable (such as the dot com crash when it lost over 80% of its value).

ETF Benefits

Both SCHB and QQQ are exchange-traded funds (ETFs), which do have some advantages for investors.

Tax Efficiency

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Tradability

ETFs are free to trade on many platforms and investors should have no problem trading SCHB or QQQ, which are large and liquid.

Alternative Vehicles

Investors limited to mutual funds should have no problem finding a mutual fund version of SCHB or a mutual fund version of QQQ.

Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate SCHB or QQQ easily.

What Would I Do: SCHB or QQQ?

In my opinion, SCHB is an appropriate core holding for most portfolios, while QQQ is not. However, I think QQQ could potentially be a satellite holding for some investors.

ITOT and QQQ are two of the most popular ETFs in the market. Given their popularity, many people compare ITOT vs QQQ and/or ask which fund is a better investment.

My answer to these types of questions is that ITOT and QQQ are very different and not necessarily comparable. So rather than write a long post about similarities and differences between ITOT and QQQ, I’ll provide a framework for thinking about ITOT vs QQQ.

My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).

Types of Investors

There are a few reasons that someone might want to know whether ITOT or QQQ is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.

New Investors

Even though ITOT and QQQ are not necessarily comparable, individual investors may not necessarily understand that the funds are different or what differences really matter. New investors may want to just skip to the bottom of this post.

Average Investors

Some investors may understand that ITOT and QQQ are quite different, but may be interested in selecting the one that they believe will perform the best. My response to these investors is that portfolio construction should be based on a target asset allocation (based on risk tolerance, time horizon, liquidity needs, and so on). Once an allocation is selected, then investors can select the best vehicle for each slice of the portfolio allocation. If an investor decides on an asset allocation before selecting investments (as they should!), then the question of ITOT vs QQQ will never come up since they fill different roles in a portfolio.

Day Traders

There are some people who think that they can trade in and out of ITOT, QQQ, and other investments profitably. To those people, I’d say the research, evidence, and odds are stacked against you but good luck!

ITOT vs QQQ: Holdings & Exposures

ITOT and QQQ are not comparable because their underlying holdings are so different. An investor’s preference for ITOT or QQQ will depend on its role in the portfolio.

Both funds primarily hold stocks, but the composition and exposures of their holdings is very different. ITOT is a total market fund, which means that it owns companies of all sizes (although cap-weighted index funds such as ITOT are heavily weighted towards large-caps). QQQ is a large-cap fund that focuses on a narrow set of sectors. This sector concentration results in higher risk, which has resulted in much higher volatility and returns (relative to ITOT).

Given the above, I believe any investor can use ITOT as a core (or even only) portfolio holding. However, I would never recommend that for QQQ. At best, it could be a satellite or complementary position.

ITOT vs QQQ: Performance, Expenses, & Risk

I could compare ITOT and QQQ’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.

Historical Performance

Since ITOT and QQQ have very different holdings and exposures, comparing historical performance is meaningless. One fund will outperform over certain time periods and the other will outperform over other time periods. I am not going to delve into a performance comparison and attribution, since we already know that the funds are very different. Readers who really want this information can check out tools like Morningstar.com.

Expenses

Again, any performance difference caused by the expense ratios of ITOT and QQQ will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but ITOT and QQQ are not equal at all!

Risk & Volatility

The two funds are very different, but I will comment on risk and volatility since it informs my view on how these funds should be used.

QQQ is riskier than ITOT, measured by both realized volatility and drawdowns. This is because QQQ is more concentrated and less diversified. This is true both for realized volatility (see below) and maximum drawdowns. QQQ does not always underperform during market stress, but the lack of diversification leaves it vulnerable (such as the dot com crash when it lost over 80% of its value).

ETF Benefits

Both ITOT and QQQ are exchange-traded funds (ETFs), which do have some advantages for investors.

Tax Efficiency

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Tradability

ETFs are free to trade on many platforms and investors should have no problem trading ITOT or QQQ, which are large and liquid.

Alternative Vehicles

Investors limited to mutual funds should have no problem finding a mutual fund version of ITOT or a mutual fund version of QQQ.

Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate ITOT or QQQ easily.

What Would I Do: ITOT or QQQ?

In my opinion, ITOT is an appropriate core holding for most portfolios, while QQQ is not. However, I think QQQ could potentially be a satellite holding for some investors.

VTI and QQQ are two of the most popular ETFs in the market. Given their popularity, many people compare VTI vs QQQ and/or ask which fund is a better investment.

My answer to these types of questions is that VTI and QQQ are very different and not necessarily comparable. So rather than write a long post about similarities and differences between VTI and QQQ, I’ll provide a framework for thinking about VTI vs QQQ.

My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).

Types of Investors

There are a few reasons that someone might want to know whether VTI or QQQ is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.

New Investors

Even though VTI and QQQ are not necessarily comparable, individual investors may not necessarily understand that the funds are different or what differences really matter. New investors may want to just skip to the bottom of this post.

Average Investors

Some investors may understand that VTI and QQQ are quite different, but may be interested in selecting the one that they believe will perform the best. My response to these investors is that portfolio construction should be based on a target asset allocation (based on risk tolerance, time horizon, liquidity needs, and so on). Once an allocation is selected, then investors can select the best vehicle for each slice of the portfolio allocation. If an investor decides on an asset allocation before selecting investments (as they should!), then the question of VTI vs QQQ will never come up since they fill different roles in a portfolio.

Day Traders

There are some people who think that they can trade in and out of VTI, QQQ, and other investments profitably. To those people, I’d say the research, evidence, and odds are stacked against you but good luck!

VTI vs QQQ: Holdings & Exposures

VTI and QQQ are not comparable because their underlying holdings are so different. An investor’s preference for VTI or QQQ will depend on its role in the portfolio.

Both funds primarily hold stocks, but the composition and exposures of their holdings is very different. VTI is a total market fund, which means that it owns companies of all sizes (although cap-weighted index funds such as VTI are heavily weighted towards large-caps). QQQ is a large-cap fund that focuses on a narrow set of sectors. This sector concentration results in higher risk, which has resulted in much higher volatility and returns (relative to VTI). Interested readers can check out our review of VTI or our upcoming QQQ review.

Given the above, I believe any investor can use VTI as a core (or even only) portfolio holding. However, I would never recommend that for QQQ. At best, it could be a satellite or complementary position.

VTI vs QQQ: Performance, Expenses, & Risk

I could compare VTI and QQQ’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.

Historical Performance

Since VTI and QQQ have very different holdings and exposures, comparing historical performance is meaningless. One fund will outperform over certain time periods and the other will outperform over other time periods. I am not going to delve into a performance comparison and attribution, since we already know that the funds are very different. Readers who really want this information can check out tools like Morningstar.com.

Expenses

Again, any performance difference caused by the expense ratios of VTI and QQQ will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but VTI and QQQ are not equal at all!

Risk & Volatility

The two funds are very different, but I will comment on risk and volatility since it informs my view on how these funds should be used.

QQQ is riskier than VTI, measured by both realized volatility and drawdowns. This is because QQQ is more concentrated and less diversified. This is true both for realized volatility (see below) and maximum drawdowns. QQQ does not always underperform during market stress, but the lack of diversification leaves it vulnerable (such as the dot com crash when it lost over 80% of its value).

ETF Benefits

Both VTI and QQQ are exchange-traded funds (ETFs), which do have some advantages for investors.

Tax Efficiency

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.

Tradability

ETFs are free to trade on many platforms and investors should have no problem trading VTI or QQQ, which are large and liquid.

Alternative Vehicles

Investors limited to mutual funds should have no problem finding a mutual fund version of VTI or a mutual fund version of QQQ.

Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate VTI or QQQ easily.

What Would I Do: VTI or QQQ?

In my opinion, VTI is an appropriate core holding for most portfolios, while QQQ is not. However, I think QQQ could potentially be a satellite holding for some investors.

FNCMX vs QQQM

QQQM is a large and popular ETF. The NASDAQ Composite Index is one of the most popular and most-watched indices. Interestingly, QQQM does not track the NASDAQ Composite Index; QQQM tracks the Nasdaq 100 Index. In other words, “The NASDAQ” Composite Index is referred to in the news and displayed on websites/TV, while the NASDAQ 100 Index seems to be the benchmark for more investable funds and strategies. Despite their similar names, a comparison of the FNCMX vs QQQM reveals some major differences.

The FNCMX and QQQM have very different compositions, slightly different weights and exposures, and performance differences have reflected that.

A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: FNCMX vs QQQM

FNCMX was launched back in September 2003, while QQQM was launched many years later in October 2020. Since that time, QQQM has outperformed FNCMX by a wide margin of over 2% annually. In other words, investing in “the Qs” would have beaten investing in “the Nasdaq” by quite a bit (nearly 5.5% over just the past 2.5 years)!

Those looking to evaluate performance history before the 2000s should compare the index performance of these ETFs’ benchmarks and may want to read our post on the Nasdaq 100 vs Nasdaq Composite.

Investors looking for a larger, more liquid version of QQQM may want to check out my comparison of QQQ vs FNCMX. Investors looking for an ETF version of FNCMX should read my comparison of ONEQ vs FNCMX.

Differences between FNCMX and QQQM

Overall, the two funds are very similar, since they are both based on the same universe of stocks. FNCMX holds approximately 1,000 stocks, while QQQM owns roughly 100 stocks. The NASDAQ site publishes the index methodologies for both the Composite and 100.

Geographic Exposure

Substantially all (95%+) of each ETF is composed of US-based companies, so I will not include the usual tables of countries, market classification, and so on.

Market Cap Exposure

QQQM holds the 100 largest stocks on the NASDAQ exchange (excluding financials), so it has a much larger weighting to large-caps than FNCMX which tracks the Composite Index. However, both funds use weighting methodologies based on market-cap, so large-caps dominate each fund.

Below is an estimate of the market cap exposure as of 11/28/2022.

	FNCMX	QQQM
Large Cap	73%	93%
Mid Cap	16%	7%
Small Cap	10%	0%

Sector Weights

Given that FNCMX tracks a much broader index than QQQM, it is not surprising that the FNCMX owns more sectors and is less concentrated than QQQM. Below are the sector weightings of the two funds, as of 11/29/2022.

	FNCMX	QQQM
Basic Materials	0.39%	0.00%
Consumer Cyclical	14.17%	14.25%
Financial Services	5.53%	0.85%
Real Estate	1.23%	0.00%
Communication Services	13.18%	15.25%
Energy	0.82%	0.00%
Industrials	5.28%	5.07%
Technology	43.31%	47.92%
Consumer Defensive	5.08%	7.22%
Healthcare	9.89%	7.96%
Utilities	1.14%	1.48%

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Fidelity. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Fidelity does not participate in the pay-to-play arrangements (with their competitor custodians) that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Fidelity, it is generally free to trade FNCMX or QQQM. However, only QQQM is free to trade in many non-Fidelity accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .07% for QQQM and individual investor trades will not generally be large enough to “move” the market. In the case of QQQM, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). This is true of QQQM and FNCMX, as QQQM does not make capital gains distributions and FNCMX frequently does.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards FNCMX. If all ETFs, I might lean more towards QQQM.

Tradability

FNCMX does not have a stated minimum for purchases, although some brokerages (especially competitors of Fidelity) impose minimums. The minimum purchase size for QQQM is typically one share, although fractional shares are becoming more common. Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: FNCMX vs QQQM

The decision of whether to invest in FNCMX vs QQQM comes down to whether an investor wants a more fund that is more concentrated in large-cap and tech or a more diversified portfolio. As the chart of FNCMX vs QQQM shows, QQQM has done better historically although this may not hold true moving forward (especially if tech and/or large-caps fall out of favor).

FNCMX vs QQQ

QQQ is one of the largest, most popular, and most liquid ETFs. The NASDAQ Composite Index is one of the most popular and most-watched indices. Interestingly, “the Q’s” does not track the NASDAQ Composite Index; QQQ tracks the Nasdaq 100 Index. In other words, “The NASDAQ” Composite Index is referred to in the news and displayed on websites/TV, while the NASDAQ 100 Index seems to be the benchmark for more investable funds and strategies. Despite their similar names, a comparison of the FNCMX vs QQQ reveals some major differences.

The FNCMX and QQQ have very different compositions, slightly different weights and exposures, and performance differences have reflected that.

A reminder that these are simply examples as this site does NOT provide investment recommendations.

Historical Performance: FNCMX vs QQQ

QQQ is the older fund with an inception date of March 10, 1999. FNCMX was launched just a few years later in September 2003. Since that time, QQQ has outperformed FNCMX by a wide margin of over 2% annually. In other words, investing in “the Qs” would have beaten investing in “the Nasdaq” by quite a bit (nearly 335% over the past 20 years)!

Those looking to evaluate performance history before the 2000s should compare the index performance of these ETFs’ benchmarks and may want to read our post on the Nasdaq 100 vs Nasdaq Composite.

Investors looking for a lower cost version of QQQ may want to research QQQM and/or read my post comparing QQQM vs QQQ or FNCMX vs QQQM. Investors looking for an ETF version of FNCMX should read my comparison of ONEQ vs FNCMX or ONEQ vs QQQ.

Differences between FNCMX and QQQ

Overall, the two funds are very similar, since they are both based on the same universe of stocks. FNCMX holds approximately 1,000 stocks, while QQQ owns roughly 100 stocks. The NASDAQ site publishes the index methodologies for both the Composite and 100.

Geographic Exposure

Substantially all (95%+) of each ETF is composed of US-based companies, so I will not include the usual tables of countries, market classification, and so on.

Market Cap Exposure

QQQ holds the 100 largest stocks on the NASDAQ exchange (excluding financials), so it has a much larger weighting to large-caps than FNCMX which tracks the Composite Index. However, both funds use weighting methodologies based on market-cap, so large-caps dominate each fund.

Below is an estimate of the market cap exposure as of 11/28/2022.

	FNCMX	QQQ
Large Cap	73%	93%
Mid Cap	16%	7%
Small Cap	10%	0%

Sector Weights

Given that FNCMX tracks a much broader index than QQQ, it is not surprising that the FNCMX owns more sectors and is less concentrated than QQQ. Below are the sector weightings of the two funds, as of 11/29/2022.

	FNCMX	QQQ
Basic Materials	0.39%	0.00%
Consumer Cyclical	14.17%	14.25%
Financial Services	5.53%	0.85%
Real Estate	1.23%	0.00%
Communication Services	13.18%	15.25%
Energy	0.82%	0.00%
Industrials	5.28%	5.07%
Technology	43.31%	47.92%
Consumer Defensive	5.08%	7.22%
Healthcare	9.89%	7.96%
Utilities	1.14%	1.48%

Factors to Consider

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Fidelity. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Fidelity does not participate in the pay-to-play arrangements (with their competitor custodians) that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Fidelity, it is generally free to trade FNCMX or QQQ. However, only QQQ is free to trade in many non-Fidelity accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for QQQ and individual investor trades will not generally be large enough to “move” the market. In the case of QQQ, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). This is true of QQQ and FNCMX, as QQQ does not make capital gains distributions and FNCMX frequently does.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards FNCMX. If all ETFs, I might lean more towards QQQ.

Tradability

FNCMX does not have a stated minimum for purchases, although some brokerages (especially competitors of Fidelity) impose minimums. The minimum purchase size for QQQ is typically one share, although fractional shares are becoming more common. Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts: FNCMX vs QQQ

The decision of whether to invest in FNCMX vs QQQ comes down to whether an investor wants a more fund that is more concentrated in large-cap and tech or a more diversified portfolio. As the chart of FNCMX vs QQQ shows, QQQ has done better historically although this may not hold true moving forward (especially if tech and/or large-caps fall out of favor).