SPY versus QQQ - Which is a Better Buy?

🌟🌟🌟September was the worst month in 2023 with a brutal sell off especially Big Tech.  The Nasdaq 100 Index was down 5.8%, its worst performance since end 2022.  The S&P500 Index was down 4.9%, more than the 3.5% slide by the Dow Jones Industrial.

Investors are climbing a wall of worry amidst looming US government shutdown, 10 year Treasure yields the highest since 2007, geopolitical tensions, Ukraine war and a slew of unwelcome news.

$SPDR S&P 500 ETF Trust(SPY)$ 

Is down 5%  in the past month but still up 12% year todate.

$Invesco QQQ Trust(QQQ)$ 

Is also down 5% in the past month but up an impressive 35% year todate.

SPY versus QQQ - Which is a Better Buy?  Will a Bearish outlook drain the share prices of one before the other?  Is one a better buy during the dip? And how should the uncertain future hold for Big Tech?

SPY tracks the S&P500 ETF and is the 1st ever  ETF established and the largest in market capitalisation.  SPY remains the largest and most traded ETF in the world.  With USD 376 billion in Assets, SPY dwarfs its rival QQQ's mere USD 162 billion.  SPY is also traded at a 50% higher frequency.  Spy's Top 10 holdings comprise of just 26% of its total portfolio and is comprised of 24 industries, far more than QQQ.

SPY's Top 10 holdings include the Magnificent 7 - $Apple(AAPL)$ $Microsoft(MSFT)$ 

$Amazon.com(AMZN)$ 

$NVIDIA Corp(NVDA)$ 

Google, Tesla, Meta Platforms, Berkshire Hathaway and Exxon Mobil. 

QQQ is Tech Heavy.  It does not include Financial stocks.  The Magnificent 7 takes up 43% weightage of the ETF followed by Broadcom and Costco.

QQQ delivers exposure to companies that are at the forefront of innovation with transformative long term  themes such as Augmented Reality, Cloud Computing, Big Data, Mobile Payments, Streaming Services, Electric Vehicles and more. 

The expense ratio of QQQ is 0.20% versus SPY at 0.0945%. 

QQQ's distribution yield is 0.60% versus SPY's distribution yield at 1.52%.

However performance wise, QQQ is up 35% year to date while SPY is only up 12% year todate.  If we look long term, QQQ is up 17% in the past 10 years versus SPY at 11%.

QQQ's Tech focus has led to more volatile performance but higher returns overall.

While data may present SPY as safer and more recession proof since it is more diversified, if Big Tech takes off to the moon, you will be glad to have QQQ in your portfolio.

However if you are less Bullish on Big Tech and simply seeking a good inflation hedge, SPY is a better bet.  Sometimes boring is good.  SPY may even rally past QQQ given its exposure to growth sectors like Energy and Infrastructure. 

To simplify things, QQQ is a better way to invest in Big Tech while SPY is better for investing in the market as a whole.

SPY versus QQQ - Which is a Better Buy?  Choose SPY if you want more diversification.  Choose QQQ if you want better returns. Or why not buy both?  That way you have the best of both worlds.  They are both excellent ETFs to have in our portfolio for long term returns. 

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