Is Vanguard VOO or Invesco QQQ the Better Buy? How S&P 500 Diversification Compares to Tech-Focused Growth

Core Viewpoint - The Vanguard S&P 500 ETF (VOO) and the Invesco QQQ Trust, Series 1 ETF (QQQ) are both large-cap U.S. equity ETFs, but they differ in expense ratios, sector focus, and risk profiles, which may appeal to different investor priorities [1]. Group 1: Cost and Size - VOO has a lower expense ratio of 0.03% compared to QQQ's 0.18% [2]. - As of February 7, 2026, VOO's one-year return is 13.92%, while QQQ's is 15.12% [2]. - VOO offers a higher dividend yield of 1.11% compared to QQQ's 0.45% [2]. - VOO has assets under management (AUM) of $839 billion, significantly higher than QQQ's $412 billion [2]. Group 2: Performance and Risk Comparison - Over the past five years, VOO experienced a maximum drawdown of -24.53%, while QQQ had a deeper drawdown of -35.12% [3]. - An investment of $1,000 in VOO would have grown to $1,782 over five years, whereas the same investment in QQQ would have grown to $1,840 [3]. Group 3: Portfolio Composition - QQQ tracks the NASDAQ-100 with a heavy concentration in technology (51%) and communication services (17%), with top holdings including Nvidia, Apple, and Microsoft [4]. - VOO mirrors the broader S&P 500, allocating 35% to technology, 13% to financial services, and 11% to communication services, with similar top holdings but at lower weights [5]. Group 4: Implications for Investors - QQQ is more concentrated in tech and designed for growth, achieving above-average returns compared to VOO [6]. - VOO offers greater diversification with roughly five times as many holdings as QQQ, which may reduce sector volatility [7]. - Investors seeking stability may prefer VOO, while those looking for higher growth potential may opt for QQQ, accepting the associated risks [8].