The market for growth stocks has been on fire in recent years, with the Nasdaq Composite Index soaring more than 43% in 2020.
That’s been great news for investors in growth ETFs like the Invesco QQQ Trust (QQQ) and the Vanguard Mega Cap Growth ETF (MGK).
But which of these two growth ETFs is the better pick right now? Here’s a look at how they stack up.
|Funds||Vanguard Mega Cap Growth Index Fund ETF||Invesco QQQ Trust|
|3-year total return||+14.64%||+17.59%|
|3-year standard deviation||23.10%||22.71%|
|Min. initial investment||—||—|
|Net expense ratio||0.07%||0.20%|
|Total net assets||11.25bn USD||164.34bn USD|
|Morningstar category||Large Growth||Large Growth|
MGK: Vanguard Mega Cap Growth ETF
MGK is an ETF that tracks the CRSP US Mega Cap Growth Index. It’s a passively managed ETF, which means it’s not actively managed by a fund manager but instead follows a predetermined strategy.
MGK invests in companies with large market capitalization and high price-to-earnings ratios. This makes it a large-cap growth ETF and allows you to participate in the growth of some of largest companies.
QQQ: Invesco QQQ Trust Series 1
QQQ is a growth ETF that tracks the Nasdaq 100 Index. It’s also an index fund and a large-cap growth ETF, which means it invests in companies that are expected to grow faster than the broader market.
QQQ is one of the most traded ETFs, with an average daily trading volume of over 56 million shares.
MGK vs QQQ: Key differences
The key differences between MGK and QQQ are:
- Their performance records.
- The fees they charge investors.
- The types of stocks that each ETF holds.
Noticeably, MGK only charges 0.07% per year, while QQQ charges 0.20%. In other words, for every $10,000 invested, you’re paying $7 to Vanguard and $20 to Invesco.
MGK will be cheaper to own over time because that difference adds up quickly over many years!
In terms of performance QQQ has outperformed MGK over the past ten years.
Investors should also know that QQQ is primarily centered around tech stocks while MGK is diversified with a basket of large-cap stocks.
In the past, the Tech sector has outperformed other sectors. And we don’t anticipate this trend to slow down.
MGK vs QQQ: Which ETF Is Better?
To summarize: If you’re looking for growth without too much risk, consider buying shares of MGK; if you’re willing to accept more risk for potentially higher returns, buy shares of QQQ instead.