ETF Battles: QQQ vs. SPY - YouTube

- Welcome to battle of the ETFs.

I'm Ron DeLegge with ETFguide.

On today's episode, we've got a big league matchup of two giants, QQQ and SPY, two of

the most heavily traded securities and ETFs on the planet.

The question is, who wins the battle?

We're going to take a look at cost, dividends, diversification, performance and declare the

winner on today's program.

If QQQ and SPY were boxers, this would be like Ali versus Frazier.

Both are strong, both are fast and both are fearsome opponents.

And each one has its strengths and weaknesses.

But at the end of the day, the judges have got to declare a winner.

And that's what we're gonna do on this episode.

Now let's begin with QQQ versus SPY.

The first thing we wanna examine are the similarities between both of these ETFs.

First, both QQQ and SPY are U.S. equity funds, rather obvious, but we need to state the facts

before the court of law.

Both are among the largest ETFs by assets under management.

SPY has around $320 billion, while QQQ has just under $100 billion.

Both funds weight stocks by their market capitalization.

Both funds overlap and own many of the same types of companies like Apple and amazon.com

and Microsoft and Facebook and Alphabet.

Both funds pay quarterly dividends, both funds have an active options market with multiple

explorations and strikes for both calls and puts.

That's good because it gives traders lots of flexibility.

Now let's talk about some of the differences between QQQ and SPY.

Because the differences are quite meaningful.

QQQ is listed on the Nasdaq stock exchange.

Whereas SPY is listed on the New York stock exchange.

Of the underlying stocks in QQQ, it should be noted, are restricted to just and only

Nasdaq listed stocks.

And that's a big difference.

SPY owned stocks listed on various exchanges.

Also, QQQ holds a basket of just 100 stocks, whereas SPY has 500.

So who wins the battle?

Well, the first category is cost.

SPY wins because it charges a lower annual expense ratio of just 9 basis points compared

to QQQ, which charges a much higher fee of 20 basis points.

So put another way, QQQ is double the annual cost of SPY.

So, SPY easily wins on cost.

Next up is diversification.

Who does better?

Well QQQ his underlying index is restricted to Nasdaq listed stocks only.

And plus too, it only holds a hundred stocks and it completely emits financial stocks.

Almost 65% of QQQ sector exposures to technology companies alone, which isn't very diversified

at the end of the day.

And if you blindfolded me and asked me to guess what type of ETF that QQQ is, I would

immediately describe it as an industry sector fund linked to technology.

Now in contrast, SPY wins on diversification because not only does it have more stocks,

500, but also the stocks, it owns, are scattered across 11 different industry groups, which

include technology along with a whole bunch of other important industry groups like healthcare,

financials, utilities, industrials and materials.

Next up is the dividend yield.

QQQ has a 12 month distribution dividend of just .71%.

Whereas SPY has a 12 month yield of 1.85%.

Now once again, SPY wins because it has a better dividend.

And that's not very surprising when you think about it because QQQ is a tech heavy ETF and

tech stocks generally pay lower dividends or doesn't pay dividends at all, compared

to other industry groups.

SPY gains the upper hand on dividends with the help of it's exposure to some of those

other dividend sectors like real estate and utilities that it holds.

Last up is performance, QQQ has gained around 36% over the past year while SPY has gained

27%.

So QQQ wins a short term performance race, but wait, that's not all!

QQQ outperformed SPY over the past 10 and 15 years also.

But if we go back 20 years, SPY wins because it gained around 232% not including dividends,

while QQQ gain just 166%.

And at the end of the day, QQQ lights out performance during the past one, 10 and 15

years is largely due to its concentrated portfolio to tech stocks.

SPYs less concentrated exposure to tech during the timeframe, the recent timeframe, resulted

in a lower return, but over 20 years, SPY managed to outperform QQQ by a not so small

66%.

This is a split decision with QQQ winning the shorter term performance race while SPY

wins the longer term race, but I've got to declare a winner.

And the final winner for today's hard fought battle between QQQ and SPY is SPY, the SPDR

500 ETF.

It's got lower costs, better diversification, a higher dividend yield and better long term

performance.

I'm Ron DeLegge with ETFguide.

Thanks for watching.