The Vanguard Information Technology ETF (VGT) and the Invesco QQQ ETF (QQQ) are two of the largest and oldest ETFs. VGT 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 VGT by market-cap.
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 VGT is 100% tech stocks (of all market caps).
The Long Answer
Historical Performance: QQQ vs VGT
QQQ was launched on in 1999, while VGT was launched in January 2004. Since then, QQQ has outperformed by .46% annually. The cumulative performance differential over that time period is about 62%. That being said, the performance between these two funds is extremely close, which is somewhat surprising given their differences.
Differences between QQQ vs VGT
The two main differences between VGT and QQQ are their sector exposures and market cap exposures. VGT 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 VGT 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 VGT is more of an all cap fund. Due to market cap weighting, both funds are overwhelmingly influenced by the large-cap holdings though.
| VGT | QQQ | |
| Large-Cap | 84% | 93% |
| Mid-Cap | 12% | 7% |
| Small-Cap | 5% | 0% |
Sector Weights
The sector weights between VGT and QQQ are nearly identical.
| VGT | QQQ | |
| Basic Materials | 0.01% | 0.00% |
| Consumer Cyclical | 0.03% | 15.54% |
| Financial Services | 7.52% | 0.75% |
| Real Estate | 0.00% | 0.24% |
| Communication Services | 0.13% | 16.18% |
| Energy | 0.00% | 0.48% |
| Industrials | 2.24% | 4.20% |
| Technology | 90.06% | 48.56% |
| Consumer Defensive | 0.00% | 6.02% |
| Healthcare | 0.00% | 6.76% |
| Utilities | 0.00% | 1.25% |
Expenses
The expense ratio for VGT is .10%, while QQQ’s expense ratio is .20%. Although QQQ’s expense ratio is 100% higher than VGT’s, its only 10 basis points in absolute terms.
Transaction Costs
ETFs are free to trade at many brokers and custodians, so both VGT 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 of both VGT 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 VGT 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 VGT
Both VGT and QQQ are large, popular funds sponsored and managed by two of the largest asset managers in the world. Although VGT and QQQ are quite different, performance has been extremely 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 VGT and QQQ.
