Investing Smartly: Comparing Popular ETFs QQQ And VOO For Long-Term Growth

Investors are constantly on the lookout for the next hot investment vehicle, and ETFs (Exchange-Traded Funds) have earned a top spot in investors' go-to arsenal of options. Between their simplicity, diversification, and potential for steady returns, investors are exploring ETF opportunities en masse. 

Naturally, there are a multitude of options for ETF investments, with QQQ and VOO funds ranking as two of the top choices. Both track major market indices and offer cost-effective access to diverse markets. However, each has advantages that could mark the difference between an investment profit or loss depending on how someone uses them. For long-term investors to make informed decisions, it's vital to understand the differences between QQQ and VOO to utilize investment opportunities best. The rises and falls can be quite significant and abrupt, and sites like Double Finance can help investors track the trends. 

QQQ Vs VOO

Simply put, the biggest difference between QQQ vs VOO is their underlying indices. QQQ focuses on the Nasdaq-100, which is primarily geared toward tech companies. As its name suggests, the Nasdaq-100 index tracks the 100 biggest non-finance companies on the Nasdaq stock exchange. 

Meanwhile, VOO gives broad coverage of the S&P 500 index, which follows the performance of the 500 biggest publicly traded U.S. companies. This covers more ground, and the VOO's broad coverage of the index offers stability and diversification. QQQ was created by Vesco in 1999, while VOO is a much younger option that Vanguard developed in 2010.

Examining the Risks Of QQQ and VOO

Like any investment, there are pros and cons of each choice. One drawback of QQQ is the sector concentration that focuses on technology. With the ebbs and flows of the tech industry, it can be risky to put all of your eggs in one basket. Additionally, QQQ is known for being rather volatile, with a 1.19 beta. The downswings can be severe, but the upswings can be well worth it for people who invest long-term. 

Cost is another significant factor. The 0.20% expense rate of QQQ is considered to be mid-level. Again, the upswings can more than offset that, but there's no guarantee that there won't be more permanent downswings on the horizon.  

Like QQQ, VOO is typically better for long-term investing based on the rate of highs and lows. However, VOO's low expense rate of 0.03 beats QQQ by a long shot. Unlike QQQ, VOO does offer brand diversification and broad market exposure, which can impact the severity of a loss. 

Double Finance analyzes and explains the difference between the ETFs and compares them in real time. 

Choosing the Right ETF Option For Each Individual's Needs

All in all, there are dozens of ways to invest–between ETFs, bonds, mutual funds, CDs, stocks, and a host of other avenues investors can choose from. EFTs can be high risk, but they also have the possibility to be very high reward, which has made them an incredibly popular option for investors based on the simplicity, diversification, and potential benefits for long-term investing. 

As noted above, their varied indices are what separate VOO and QQQ–with QQQ focusing on the Nasdaq-100 and VOO offering broad coverage of the S&P 500 index. It's important to note that VOO usually has a few less risks. However, the gains from QQQ can be plentiful with long-term investing.

The Golden Rule of Investing

As a general rule, anyone planning to invest in any capacity needs to analyze their finances and decide the maximum amount of money they're prepared to lose. No matter what happens, it's vital to stick to that number without falling into the sunk cost fallacy trap. What does that mean exactly? 

Well, it's fairly similar to someone gambling in a casino, losing big, and then trying to recoup their loss. Is there a chance it might happen? Sure. However, there's an even larger likelihood that the money will continue to flow out without ever returning to the sender. 

When it comes to investments, the same logic applies. If something isn't working out, investors need to cut their losses when they reach their predetermined maximum loss and move on. From there, when investing becomes an option again, they can reevaluate their portfolio to regroup and decide on a new or revamped plan.

Tips and Tricks for Investing

One important question investors need to ask themselves is whether or not they plan to play the long game or want a quick turnaround. For short-term investments, it makes more sense to choose safer options, while long-term investments leave some room to roll the dice on riskier opportunities.  

Another mistake people often make is only choosing one kind of investment rather than diversifying a portfolio with multiple assets—between stocks, real estate, and ETFs. This can help avoid big losses in one avenue, so if one investment takes a turn for the worst, there are still others to fall back on. 

Investors, especially those new to the game, are usually advised to focus on low-cost investments like ETFs, which are low-cost index funds. One perk of ETFs comes from the lower management fees that can eat into funds. Investors looking to try their hand at ETFs can explore their options by following trends and analyzing their financial goals to choose the best option. 

What Not to Do

While it's important to stay on top of investment trends, strategies, and the ins and outs of financial markets, trying to time the market is a no-win game. Rather than attempting to foresee the twists and turns of the future, diversifying and staying consistent are much better strategies. 

Now, that's not to say that investors shouldn't use trends, research, and shifting markets to make informed decisions. Those are all key strategies. But there's a difference between making educated chess moves and trying to predict the largely unpredictable.Remember: there's no one-size-fits-all investment option. Investors need to take the time and care to figure out their goals, decide on the amount of money they're willing to risk, and invest accordingly. In most cases, it will be a long game instead of instant gratification.

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This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This content is for informational purposes only and not intended to be investing advice.