QQQ vs. VTSAX: The Battle Continues

Two months ago, in early November 2018, I wrote a post about maybe the gold standard among the Boglehead VanGuard worshipers might not be the absolute best index for your money.

It’s been pretty common knowledge that index investing consistently and early can grow your money tremendously and even lead you to the promised land of Financial Independence with enough time in the market.

The original article is found here:  Is There a Better Index than the S&P 500? Food for Though Edition

One of my 10 regular reader, Adam at Brewing FIRE suggested I put my money where my mouth was regarding my thoughts that QQQ (The NASDAQ 100) would beat the VTSAX over time.  The QQQ is an index ETF of the largest 100 companies listed on the NASDAQ stock exchange, excluding financial companies like banks.  The VTSAX is a VanGuard total stock market index fund and is wildly popular with the “set it and forget it” investing crowd.  I bought an ETF equivalent of VTSAX called VTI which tracks the exact same thing and will mimic the VTSAX performance over time.  On last November 9 I bought a couple of thousand dollars worth of QQQ and 500 bucks worth of VTI in a Roth IRA using my own money.  Let’s have a look under our dress to see how we’ve done so far.

The overall market is down around 10% from last November and both indices reflect that.  The QQQ was down 7.5% and VTI was down 9.25% over that two month period.  I have to say that this surprises me a little bit as I thought the large tech-heavy (think Apple, Microsoft, and Google) QQQ might give up a little more in a down market like we’ve seen.  My original thesis of not wanting to own a piece of every crappy company in the total stock market index might have something to do with this.  I’m glad to have zero% exposure to the General Electrics, JC Penny’s, and Pacific Gas and Electric, which is about to file for bankruptcy.  I think the one thing that could turn things around in VTI’s favor might be outperformance of the big banks.  They stand to make more money if interest rates continue to rise in a strong economy and remember, QQQ doesn’t include any banks.  Overall, though, banks have not been a great investment the past 5 years or so.

Here are a few more details that might interest you.

  • The cost of ownership of is higher for QQQ at 0.2% vs. 0.04% for VTI
  • The dividend yield is near 2% on VTI while it’s around half of that at 0.9% for QQQ, so you’re paying less in fees for VTI and getting double the yield.  We’ll see how that math turns out in the future.
  • In 2018 VTI was down 7.5% for the year and QQQ was down 2.3%.  What do you think about that one?!
  • There are some index funds that have zero commissions but neither of these have that feature on TD Ameritrade, where I have my accounts.  So I have to pay around 7 bucks to buy additional shares in either index.  I intend to buy some more of each to mimic what a regular retail investor might do but will wait until I have a larger chunk of money and I’ll invest proportionally to the original investments when the time comes.  I’ll just pay the 7 bucks, even on a small trade, because that’s what I do for you readers.  edit:  here’s a comment from my friend Adam who was kind enough to search for commission free VTI equivalents in the TD Ameritrade platform.  “So it looks like SPTM is the new commission-free equivalent of VTI (Total Stock Market Index – 0.03% expense ratio). I don’t, however, see a QQQ equivalent. Oh well.”

For the sake of some entertainment in this boring financial series I’ll say some young and fearless newcomer to investing is going all in on QQQ.  I’ll call him Quizzical Quentin.  This Quentin is a real doubter of the tried and true and he rode his bike to Fin-Con last year to show he’s legit.  Bobby Boglehead has been worshiping at the altar of Jack Bogle of VanGuard since he bought his first Grateful Dead LP record in 1978.  It’s been a good strategy and the marijuana budget in retirement is sure to be strong with the long-term VTI performance in his corner.  He thinks that young people all have shit-for-brains and pontificates regularly on the humorless cesspool know as the Reddit Financial Independence Forum.  Most of the commentary centers around anyone who ever bought an individual stock is a Bozo and his way is the only and best way.  We’ll see how it all turns out.

By the way, my individual  stock portfolio was down just 0.5% last year compared to the -7.5% for the total market, so Bobby Boglehead can go pound sand.  The contents of the portfolio are all listed right here for you voyeurs:  Portfolio Update – Individual Stocks are Winning in 2018  That’s not to say they will outperform every single year or even long term but I don’t like closed-mindedness.  That why I dove into this study in the first place.  I always want to question the traditional wisdom of the crowd.  Isn’t that why we’re all here and trying to escape the traditional wisdom of working 40 years, having a 15 year retirement, and kicking the bucket?  I think questioning the tried and true crosses all boundaries of life and breeds independent thoughts.  There you have it. What about you Smidlappers?  Do you think I’m headed for the poor house with all this wrong-minded thinking?  Who do you think would win in a fight between Bobby and Quentin?

s-l1600 (11)
At last look this blue beautiful bidet had 2 watchers on the eBay machine.  I think it’s gonna sell!



14 Replies to “QQQ vs. VTSAX: The Battle Continues”

  1. I could talk about how I use VTSAX as part of a larger asset allocation scheme that includes individual stocks, but really I just want to know much it costs to ship a bidet!

    1. i don’t have anything in particular against vtsax, as you might imagine, only against dogma. i think it’s going to cost 60-70 bucks to ship that bidet. we shipped some big stage speakers a couple of weeks ago to maine and they were about 50 pounds each. cost about 60 bucks. if you wanted the bidet i’m in the 518 often so i would deliver it for free. cheers.

  2. Thanks for the mention- I’m glad to be one of your 10 readers haha.

    I’m mildly impressed every time we revisit QQQ vs VTI and find that QQQ is the leader. We’ve seen outperformance in both up markets and down markets, albeit with a small sample size. Can’t wait to see what the future brings! Maybe I’ll even redirect some funds into QQQ if you still have me convinced in a few months.

    I was about to tell you that VTI should be commission free on Ameritrade (Mrs. BF’s brokerage account is on there), and then I just found out it’s no longer commission free. WTF? I typically do a monthly purchase, which will cost me almost $100 per year in fees. I need to dig around and see if I can find a commission free alternative, or maybe switch brokerages.

    1. i’m very surprised since the peak last fall that qqq is still better at this point. i was looking around at commission free options, especially for monthly smaller contributions. some of those are similar but have higher expense rations, so they get you coming or going. it’s a fun contest to watch and hopefully make some extra money!

  3. I’m just lazy. That’s why my funds are mostly in VTI. I do have some in individual stocks…as an experiment, and something for me to spend time researching, since I for some strange reason love researching. I mean it’s not as if I don’t do that for 40+ hours a week at my job. Wait. I do. But my individual stocks so far have a yield of 12% for the year…through some very carefully set sell stops, and some momentum investing (aka, I got friggen luck both getting in and getting out). That being said, past performance is no guarantee of future performance. Maybe its true that investing in only the top 100 companies is better, since you are presumably investing in quality. But at least you are running an experiment, to see how the performance stacks up in real time. Also. your dogs are so dang adorable. How do you resist their begging beady eyes?

    1. he’s a great dog. the vet said he is fat and could stand to lose 5 of his 57 pounds. we’re trying but the food we give him already looks like so little!

      we’ll see how the experiment turns out. see adam’s comment on the commission free version of VTI in case you’re making more transactions any paying those fees. i love researching stocks and own over 40 names but rarely sell/trade. i might have made about 10 sales all last year to swap for something else.

What do you think? You must think something. This is the place to let it fly or just say hello.