The Fidelity MSCI Information Technology ETF (FTEC) and the Invesco QQQ ETF (QQQ) are two popular ETFs. FTEC is a tech sector ETF, while QQQ is a core holding of many investor portfolios. Each is diversified in a different way; QQQ by sector and FTEC by market-cap. Investors evaluating FTEC vs QQQ for their portfolio should consider the below factors.
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 Short Answer
The main differences between the funds is that QQQ is a tech-oriented large-cap fund, while FTEC is 100% tech stocks (of all market caps). QQQ has a lot of technology exposure, but has exposure to other sectors as well.
The Longer Answer
Historical Performance: QQQ vs FTEC
QQQ was launched on in 1999, while FTEC was launched in October 2013. Since then, FTEC has outperformed by nearly 2% annually. The cumulative performance differential over that time period is about 86%! That being said, the performance between these two funds is relatively close, considering their differences.
Differences between QQQ vs FTEC
The two main differences between FTEC and QQQ are their sector exposures and market cap exposures. FTEC tracks the tech-only MSCI US Investable Market Information Technology 25/50 Index which includes tech stocks of all market caps. QQQ tracks the Nasdaq 100 Index which is primarily large caps, but covers many sectors (even though it is heavily weighted towards tech).
Geographic Exposure
Both FTEC and QQQ hold essentially 100% 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
QQQ is essentially a large cap fund, while FTEC is more of an all cap fund. Due to market cap weighting, both funds are overwhelmingly influenced by the large-cap holdings though.
| FTEC | QQQ | |
| Large-Cap | 80% | 91% |
| Mid-Cap | 11% | 10% |
| Small-Cap | 8% | 0% |
Sector Weights
The sector weights between FTEC and QQQ are nearly identical.
| FTEC | QQQ | |
| Basic Materials | 0.02% | 0.00% |
| Consumer Cyclical | 0.00% | 13.77% |
| Financial Services | 0.13% | 0.59% |
| Real Estate | 0.00% | 0.27% |
| Communication Services | 0.18% | 15.35% |
| Energy | 0.00% | 0.52% |
| Industrials | 0.34% | 4.89% |
| Technology | 99.33% | 49.62% |
| Consumer Defensive | 0.00% | 6.57% |
| Healthcare | 0.00% | 7.17% |
| Utilities | 0.00% | 1.24% |
Expenses
The expense ratio for FTEC is .084%, while QQQ’s expense ratio is .20%. Although QQQ’s expense ratio is 100%+ higher than FTEC’s, its only 12 basis points in absolute terms.
Transaction Costs
ETFs are free to trade at many brokers and custodians, so both FTEC and QQQ should be free to trade in most cases. Additionally, these funds are among the largest ETFs and are very liquid. The bid-ask spread for FTEC is currently about .03% and QQQ 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). As expected, neither QQQ nor FTEC has ever made a capital gains distribution (nor do I expect them to). Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.
Final Thoughts: QQQ vs FTEC
Both FTEC and QQQ are large, popular funds sponsored and managed by two of the largest asset managers in the world. Although FTEC and QQQ are quite different, performance has been relatively similar. Although each fund is diversified in a different way, neither fund is really diversified. Either fund can be a piece of a portfolio rather than core holding. Investors just need to decide sectors and market caps they want exposure to when deciding between FTEC and QQQ.
