ETF Comparison: Vanguard Mega Cap Growth ETF (MGK) Versus Invesco QQQ ETF (QQQ)

MGK vs QQQ: Total cost of ownership

When it comes to fees, MGK

wins by a mile. Vanguard is synonymous with low costs, and MGK lives up to this reputation with an ultra-low 0.07% expense ratio.

In comparison, QQQ

is more than twice as expensive, charging 0.20%. For a $10,000 investment, that translates to $7 in annual fees for MGK versus $20 for QQQ.

What about trading costs? Here, QQQ has the edge with a 30-day median bid-ask spread of just 0.005%, which is minuscule. MGK’s spread is 0.023%, roughly four times as wide, but still negligible in the grand scheme of things.

Verdict: Despite being more liquid, QQQ’s higher expense ratio makes it pricier overall. MGK is cheaper.

MGK vs QQQ: Methodology and holdings

Both ETFs provide exposure to mega-cap growth stocks in the U.S. market, but their benchmarks differ significantly in approach.

Starting with QQQ, its methodology is straightforward. It tracks the Nasdaq-100 Index, which consists of the largest 100 Nasdaq-listed stocks, excluding financials, weighted by market cap. This structure provides a natural mega-cap tilt.

Now, QQQ

doesn’t explicitly filter for growth stocks—instead, its tech-heavy composition evolved due to the Nasdaq exchange’s historic appeal for technology companies.

In contrast, MGK’s benchmark

, the CRSP U.S. Mega Cap Growth Index, takes a more deliberate approach. It selects the top 70% of cumulative capitalization of the CRSP U.S. Total Market Index and explicitly focuses on growth.

Companies are screened based on several growth metrics, including historical and projected earnings per share (EPS) growth, sales per share growth, investment-to-assets ratios, and return on assets.

While the sector compositions of both ETFs are broadly similar—both heavily overweight technology followed by consumer discretionary stocks—MGK is more top-heavy.

Its top 15 holdings (out of 69) account for 72.68% of the portfolio, compared to 59.83% for QQQ’s top 15 holdings (out of 101).

Both ETFs offer exposure to the “Magnificent Seven” stocks—Apple, Nvidia, Microsoft, Meta, Tesla, Amazon, and both Alphabet share classes. However, MGK

also includes Visa and Mastercard, which are excluded from QQQ

QQQ

-1.96%

due to its policy of not holding financials.

Verdict: While both ETFs are strong options, MGK edges ahead with its economically sound index criteria and inclusion of financials, offering a more comprehensive approach to mega-cap growth investing.

MGK vs QQQ: Risk and return

In the short term, MGK

has outperformed QQQ

QQQ

-1.96%

over both three and one-year periods. However, QQQ has taken in more inflows during this time—unsurprising given its size, history, and strong brand recognition.

Over the long term, QQQ reclaims the edge. A backtest from December 27, 2007, to January 2, 2025, shows QQQ delivering a compound annual growth rate (CAGR) of 15.35%, compared to 13.15% for MGK.

From a risk perspective, both ETFs exhibit similar levels of volatility over three- and one-year periods, with comparable drawdown depths and lengths, making their risk profiles largely equivalent.

Verdict: Despite MGK’s recent outperformance, QQQ’s longer track record, higher inflows, and superior long-term returns make it the winner in this category.

This article is for informational purposes only and does not in any way constitute investment advice. The author may express their own opinions, which may not represent the opinions of ETF Central or its affiliated partners. It is essential that you seek advice from a registered financial professional prior to making any investment decisions.