The ETF Showdown: QQQ vs QQQM vs QQQJ (Ft. Cade Invests)

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Announcement

The Profit Zone will now be featuring guest writers so you can get a different perspective from other financial experts. I believe these guest posts will be a good way for you to learn about various financial topics I don’t usually speak about myself.

With that being said, this issue of The Profit Zone will be the FIRST-EVER guest post brought to you by my good friend and financial connoisseur Cade. You can follow him on Twitter here. Make sure to check out his courses as well as his own Substack newsletter (will be linked below), I promise you’ll learn a ton!

Without further ado, here is Cade on The ETF Showdown.

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Hey there everyone!

A quick background on myself so you don’t read this article thinking “who even is this guy”?

My name is Cade, the face behind the Twitter account Cade Invests. I am 23 years old and will be graduating from college in May with a degree in Mechanical Engineering. Despite my engineering education, I developed an interest in the stock market early on and have been investing now for approximately 5 years.

Over that time I have attempted penny stocks, options, day trading, and just about every other get-rich-quick strategy in the stock market.

As you can probably guess, I didn’t get rich off any of those.

Thankfully the failures led me to long-term investing before I lost all of my money.

Over the years I have become a huge fan of ETFs, aka exchange-traded funds.

For those who don’t know, ETFs are essentially a basket of stocks. When you purchase an ETF you are buying a small piece of every stock in its “basket.”

Individual stocks are great, and I own a number of them myself, but it’s hard to beat ETFs since they are extremely passive and produce respectable returns.

One of the most popular ETFs in the US is QQQ.

What many investors don’t know is there are several variations of this one ETF and we are going to cover three of them in this email

The ETF Showdown: QQQ vs QQQM vs QQQJ

Which one is right for you? Let's break it down.

QQQ - Nasdaq 100 ETF 

This is Invesco's main wheel. For any of you who are basketball fans and watch March Madness, you have likely seen the Invesco commercials pitching QQQ.

QQQ tracks the Nasdaq 100 index. While it’s often referred to as a tech ETF, QQQ also contains a number of companies in the consumer discretionary and communication services sector.

It has been around since 1999 and is one of the most popular funds out there today.

It's no slacker either, averaging 9.6% since inception.

The top 5 holdings of QQQ are Apple, Microsoft, Amazon, Tesla, and Nivida which account for approximately 40% of the fund.

Now, nothing is perfect, and for QQQ its biggest con is the expense ratio.

The expense ratio for QQQ is 0.2% meaning for every $10,000 you invest you will pay $20 in fees annually.

This might not seem very high until you compare it to Vanguard which has similar ETFs with expense ratios below 0.05%.

While this isn’t a deal-breaker for me, it is something you should take into account when analyzing QQQ.

Expense Ratio: 0.2%

Sector Allocation:

QQQM - Nasdaq 100 ETF 

You read that right, QQQM tracks the same index and has the same holdings as QQQ.

So what’s the catch?

The main difference is the expense ratio and assets under management. 

The expense ratio for QQQM is 0.15% making it 0.05% lower than QQQ. 

While this isn’t very significant, it does add up over time.

Assets under management for QQQM are $1 billion while QQQ is $150 billion. The increased volume that QQQ experiences make it more liquid and a better choice for those buying or selling options and making large trades.

Another point is that at the time of writing this, the share price of QQQM is around $140, compared to QQQ’s of $340.

If you are a long-term investor who doesn’t have access to fractional shares, QQQM's smaller share price might serve you well.

Besides that, it's basically identical to its big brother.

Sector allocation: (same as QQQ)

QQQJ - NextGen 100 ETF 

Meet the new kid on the block.

QQQJ tracks the Nasdaq NextGen 100 index. It follows companies next in line to join the Nasdaq 100.

Note that QQQJ has increased exposure to the health care sector and completely different holdings compared to the previous two.

The top 5 holdings of QQQJ are Trade Desk, Expedia Group, MongoDB, ON Semiconductors, and CoStar Group which account for 10% of the ETFs assets.

If these don’t sound very popular it’s because they aren’t, at least not yet.

Ideally, the stocks held in QQQJ will be the next Amazon and Apple.

The reason I like this ETF is instead of trying to go and pick that next 100x company, I can simply buy QQQJ and capture some of those gains through the ETF.

Remember that QQQJ is much more volatile and shouldn’t be viewed the same as QQQ or QQQM. 

Think of QQQJ as a speculative investment.

Also, the expense ratio of QQQJ is 0.15%.

Sector Allocation:

Now for all my Canadian friends that might be reading this, I did a little research to try and find you a Nasdaq 100 ETF similar to QQQ and QQQM.

After digging around, I came across the fund ZNQ Unhedged.

ZNQ tracks the Nasdaq 100 and is unhedged meaning it isn’t associated with the Canadian currency.

However, if you are a Canadian please do your own research!

In summary:

QQQ - Nasdaq 100, best for those utilizing options or doing frequent/large trades.

QQQM - Nasdaq 100, cheaper expense ratio, favors long-term investors.

QQQJ - Next Gen Nasdaq 100, new concept, increased volatility with the potential for higher returns.

ZNQ Unhedged - Nasdaq 100, for Canadian investors

I hope you found this issue of The Profit Zone helpful!

If you’d like more content like this here are a few ways to do just that:

• Follow me on Twitter (@cadeinvests)

• Join my free email (cadeinvests.substack.com) where I give one intriguing quote, one topic on investing/business, and recap the best finance memes of the week.

• Check out my 5 Star Rated Course Simply Invest With ETFs, where you’ll learn more about how ETFs work, different types of ETFs and how to analyze them so you can ensure your money is in good hands. Check it out here.

Till next time my friends, be sure to take it easy on Alex for me.

- Cade

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