Two decades of investing tell one clear story, according to Kiplinger: mega-cap tech and communications stocks have dominated the market — and the ETF you picked decided how much you pocketed. If you had put $1,000 into QQQ 20 years ago, it would be worth $20,000 today. The same sum in SPY would be worth $8,000.
QQQ vs SPY (Credits: Kiplinger)
How QQQ Delivered 16.1% Annualized Returns
The Invesco QQQ Trust (QQQ), which holds the 100 largest nonfinancial stocks on the Nasdaq, has been the purest way to ride the past 20 years’ secular growth story — from mobile to social to cloud computing and now AI. Its five biggest holdings — Nvidia, Apple, Microsoft, Micron Technology and Amazon — alone account for 30% of the ETF, and their run to multi-trillion-dollar valuations powered an annualized total return of 16.1% (price change plus reinvested dividends), per Kiplinger.
By contrast, the broad S&P 500 — tracked by ETFs like SPY and VOO — has been very good to patient investors at 11% annualized, but holds five times as many stocks, so mega-caps carry less weight. Tech and communications make up almost 48% of the S&P 500, but the index also carries roughly 12% in banking and insurance stocks, a sector hammered by the 2008 financial crisis and the rock-bottom interest rate era that followed — a drag QQQ never had to carry.
The Outperformance Comes With a Risk Premium
Kiplinger stresses the key caveat: there is no free lunch on Wall Street. QQQ’s outperformance is a risk premium. When the Federal Reserve began rapidly raising interest rates in 2021 and 2022, QQQ fell 36% from its peak, while SPY’s drawdown was roughly 25%. And if the current AI boom ever turns into a burst bubble, the report notes, this ETF is sure to take an outsized beating.
In short: over 20 years, concentration in the world’s biggest tech names won decisively — but it asked investors to stomach far bigger swings along the way. This is a report of historical returns, not a recommendation; past performance doesn’t guarantee future results.
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Source: Kiplinger — read the full story there.
