QQQ from Invesco is one of the most popular funds out there. It tracks the NASDAQ 100 Index. QQQM is new on the scene and tracks the same index. What’s the deal?
00:00 – Intro
00:15 – QQQ vs. QQQM
03:06 – Conclusion & Outro
QQQ and QQQM are two funds from Invesco that seek to track the same index: the NASDAQ-100. These are the 100 largest non-financial companies by market cap that trade on the NASDAQ exchange. This index defines itself as companies “on the forefront of innovation.” It is purely large cap growth. As such, it’s basically a tech fund at this point due to Big Tech making up such a huge chunk of the market.
First, note that QQQ is structured as a unit investment trust. It is one of the most actively traded funds in the world. It has over $180 billion in assets at this point and an average daily volume of over $12 billion. QQQ launched in 1999. It’s grown even more in popularity over the past decade or so due to its market outperformance thanks to the stellar run by Big Tech. It also has a 3x leveraged cousin TQQQ.
If you don’t already know, QQQ is not at all a well-diversified fund, and should not replace a broad market index like the S&P 500 as a core holding in a diversified portfolio. Again, it’s mostly tech companies; sectors like Utilities, Industrials, and Consumer Staples are all but absent from this fund.
Now let’s talk about QQQM. It’s an open-ended ETF. It launched in late 2020, over 20 years after its older brother. While it’s no slouch in absolute terms, it has a tiny fraction of the assets of QQQ – about $1.25 billion. Since QQQ has all the name recognition, QQQM hasn’t attracted the assets that we might expect given its lower fee.
QQQM tracks the same index – the NASDAQ 100. The important differentiator for investors looking to buy and hold this index for the long term is the fee. QQQ has a fee of 0.20%, while QQQM is cheaper at 0.15%. If you’re using a tax-advantaged account and you currently own QQQ, switch to QQQM. Period.
Day traders, on the other hand, will appreciate the much greater liquidity and smaller spread of QQQ. Specifically, the average spread on QQQ is $0.01, compared to $0.03 for QQQM.
So why 2 funds for the same index from the same provider?
Invesco’s launch of QQQM is a response to the demand from retail investors for lower fees, which has been great for the industry as a whole and can be seen from the likes of Vanguard, Schwab, etc. competing with each other for assets. Why wouldn’t Invesco just lower the fee of QQQ from 0.20% to 0.15% and call it a day? In short, the seemingly small difference of 0.05% would account for nearly $100 million in revenue annually for them.
Read the blog post here:
#investing #stocks #stockmarket #etfs #etf #nasdaq #qqq
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