Strategic Investing: QQQ or QQQm — Choosing the Best Nasdaq-100 Fund

Strategic Investing: QQQ or QQQm — Choosing the Best Nasdaq-100 Fund

The Nasdaq-100 Index is a great choice for medical professionals who want to invest in technology and innovation-focused companies. Invesco’s QQQ and QQQM are two known exchange-traded funds that follow this index. While both ETFs seek to mimic the Nasdaq-100s performance, there are other factors to consider when deciding which of them you should invest in. From their varying costs, your preferred trading volume, dividends, past returns, and more, here’s everything you need to know when comparing QQQ vs. QQQM ETFs.

Overview of QQQ & QQQM

QQQ, also known as the Invesco QQQ Trust, is one of the most popular, widely traded, and most well-known ETFs. The QQQ Trust was established in 1999. QQQM, the Invesco Nasdaq-100 ETF, was launched more recently in October 2020 as a lower-cost alternative to QQQ.

Comparing QQQ vs. QQQM

While both track the Nasdaq-100 Index, there are quite a few differences to these investment options for doctors. Notably, QQQM has a lower expense ratio (0.15%) compared to QQQ (0.20%). And because QQQ is a unit investment trust (UIT) while QQQM is a traditional ETF, this impacts taxes and trading flexibility of these funds. QQQ may be less tax-efficient because it must distribute capital gains annually, even if you don’t sell your shares. QQQM, on the other hand, generally distributes fewer capital gains and allows for creation and redemption of shares directly with the fund, which is highly beneficial for large investor or medical professional who want tax efficiency. Discover more about the differences between QQQ and QQQM below.

ETF Expense Ratio Trading Volume Dividends Annual Returns
QQQ Higher Higher Lower Higher
QQQM Lower Lower Higher Lower

Expense Ratios

Expense ratios are a crucial factor for long-term investors as they directly impact net returns. QQQ has an expense ratio of 0.20%, while QQQM boasts a lower expense ratio of 0.15%​. This difference, though seemingly small, can add up significantly over time, especially for large investments.

ETF Expense Ratio
QQQ 0.20%
QQQM 0.15%

Liquidity & Trading Volume

Liquidity is an important consideration for active traders. QQQ has a much higher average daily trading volume compared to QQQM, making it a more liquid option with tighter bid-ask spreads​​. This higher liquidity can result in lower transaction costs for frequent traders.

ETF Average Daily Trading Volume
QQQ Higher
QQQM Lower


Dividend yield is another important aspect, particularly for income-focused investors. Historically, QQQ and QQQM have shown slightly different dividend yields. As of recently, QQQ has a trailing twelve-month dividend yield of around 0.61%, while QQQM offers a slightly higher yield at 0.69%​.

ETF Dividend Yield
QQQ 0.61%
QQQM 0.69%

It’s also worth noting that both ETFs pay dividends quarterly in March, June, September, and December, providing regular income to investors.

Performance & Historical Returns

Both QQQ and QQQM track the Nasdaq-100 Index, leading to similar performance. However, due to its longer history, QQQ provides a more comprehensive track record. Over the past year, QQQ has returned approximately 39%, while QQQM has performed at around 33%.

ETF 1-Year Return 5-Year Return 10-Year Return
QQQ 39.35% 20.65% 18.60%
QQQM 32.77% 18.53% N/A

Risk-Adjusted Performance

Risk-adjusted performance metrics such as the Sharpe ratio provide insights into how much return an investor receives for the risk taken. Both QQQ and QQQM have similar Sharpe ratios, indicating comparable risk-adjusted returns​.

ETF Sharpe Ratio Sortino Ratio Omega Ratio Calmar Ratio Martin Ratio
QQQ 2.40 3.26 1.40 2.27 11.75
QQQM 2.41 3.26 1.40 2.29 11.83


The composition of both ETFs is nearly identical, as they both aim to replicate the performance of the Nasdaq-100. As of the latest data, the top holdings in both QQQ and QQQM include tech giants like Apple (8.07%), Amazon (5.25%), Broadcom (4.65%), Microsoft (8.61%), and NVIDIA (6.49%).

Tax Considerations

Another factor to consider is the tax implications of switching between these funds. Long-time QQQ holders may be hesitant to switch to QQQM due to potential capital gains taxes incurred upon selling QQQ shares​. This makes QQQ a better option for those who already have significant investments in it and wish to avoid additional taxes.

Specific Use Cases

For physicians looking for a more cost-effective entry into the tech sector without sacrificing your investment portfolio performance, QQQM offers an appealing alternative to QQQ. Conversely, those who require the higher liquidity and established track record of QQQ will find it to be a solid choice despite its slightly higher expense ratio.

For Active Traders

For active traders who prioritize liquidity and tighter bid-ask spreads, QQQ is likely the better choice due to its higher trading volume and longer trading history. This can make a significant difference in trading efficiency and costs.

For Long-Term Investors

Long-term, buy-and-hold investors might prefer QQQM due to its lower expense ratio, which can lead to higher net returns over time. The slightly higher dividend yield also adds to the appeal for income-focused medical investors.

The Bottom Line: Picking Which ETF Is Right For You

Both QQQ and QQQM offer robust exposure to the Nasdaq-100 Index, making them suitable choices for doctors looking to capitalize on the growth of leading tech companies. The choice between the two largely depends on individual investment strategies and priorities.

  • Choose QQQ if you value higher liquidity and a longer performance history, which might be crucial for active traders.
  • Choose QQQM if you are a buy-and-hold investor looking for a slightly lower expense ratio to maximize net returns over the long term.

Ultimately, both ETFs are excellent tools for gaining diversified exposure to the tech sector. Assess your investment goals, risk tolerance, and trading habits to decide which fund aligns best with your financial objectives.

Investors should also consider consulting with a financial advisor to tailor their investment strategy to their specific financial goals and risk tolerance. A financial advisor can provide personalized advice and help navigate the complexities of ETF investing, ensuring a well-rounded and informed investment decision.

Additional Investment Fund Resources

Ready to explore investments further? The following articles in this series provide detailed breakdowns of different investment funds:

The information provided in this blog post is for general informational purposes only and should not be construed as financial advice. For specific financial counsel on investments, we strongly recommend seeking the guidance of a qualified expert.

Published on May 17, 2024

Written by The Influent Staff

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