QQQ vs. VTI: Which ETF Should Be the Bedrock of Your Portfolio? – 24/7 Wall St.

It's challenging for an active manager to consistently put the S&P 500 on top. But what about the various market indexes that have steadily surpassed over the years, such as the index exchange funds (ETFs) following the Tech Heavy Nasdaq 100?

For most years (especially until 2018), the Nasdaq 100 stood much higher than the S&P 500. But just because the Nasdaq 100 tends to overtake the market along the way doesn't mean that it will move forward, especially if Tech moves from the boom to the bust.

In this article, we will determine whether it is better to look at Gain Heavy (at least recent) indexes, like technology. Investco QQQ Trust (NASDAQ: QQQ), Nasdaq 100 or Vanguard Total Stock Market Index ETF (NYSEARCA: VTI), popular and wider alternative to the S&P 500.

Investco QQQ Trust (QQQ)

Certainly, it appears that more artificial intelligence (AI) hype is at a higher price compared to the S&P 500 or the broader total market index fund. Also, if Mega-Cap Tech's large AI-related CAPEX involves solid returns on investments in the near future, a higher multiple of the average holding is worth paying, but investors are more likely to have a broader AI revolution. You should also not forget to make a profit from market exposure.

In many ways, non-technical traditional companies have high-tech caps. Certainly, many of them may have hired a lot of technical talent in recent years given everything you can get from integrating AI into your business. In any case, I think it's highly likely that many such non-technology companies don't have AI premiums yet at the current level. Recent period.

At the time of writing, QQQ is about 30% expensive and now boasts a multiple of around 35 times the price (P/E). While it's much higher than VTI or most other ETFs with a significant overlap with the S&P 500, the VTI is more attractive, but comes down to 27.2 times the P/E.

A high multiple of QQQ could mean more pain (remember that the sale in 2022 is unkind to QQQ vs VTI?) The powerful low-cost AI model is left It ends what comes out of the field, surprises us all and even more shocking the AI-winners who have pulled the market higher in the last two years.

I think QQQ is a solid basket of innovative companies that seizes AI opportunities and will work well over the next decade with which technologies will continue (for many, it's quantum computing). That said, I don't think QQQ should form the bedrock for their portfolio. Instead, I consider it a great complement to a diversified portfolio based on a wider range.

Vanguard Total Stock MarketETF (VTI)

The Vanguard Total Stock market is a better bet for investors who want to do well over time but don't want to directly harm them if an AI bubble explodes at some point. Deepwater Asset Management's Gene Munster is an AI-bomb bull, but even he has admitted it ends in a bubble that could burst in a few years.

Now he's watching 2027. And when the time comes, VTI may not feel much of an impact. However, given the subtle but still significant exposure to tech stocks, especially stocks with ample AI spending, the stocks can feel part of the shock wave.

In short, investors shouldn't expect QQQ and other Nasdaq 100 ETFs to beat the S&P 500 forever. If history repeats itself and AI trading ends like the internet boom, perhaps more cautious investors would be better off buying and holding VTIs. Personally, I see Deepseek's AI breakthrough as an indication that tech companies must risk turning their backs on Wall Street at some point in the queue.

As a more diversified (thousands of stocks), cheaper (0.03% cost ratio vs. 0.20% in QQQ), and more general options, I think VTI is a good option for the bedrock of most investor portfolios. That being said, for young investors willing to pay a premium for a better seat in the AI ​​show, I am not against sprinkling some QQQs into it. Perhaps the ideal combo is a VTI-heavy fund with a 10-20% allocation to QQQ.