$50K to invest, VTI or QQQ?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
JHU ALmuni
Posts: 255
Joined: Tue Jan 20, 2015 12:40 pm

$50K to invest, VTI or QQQ?

Post by JHU ALmuni »

I have about $50K to invest and debating if I should invest in VTI or QQQ. I know VTI is more diverse but seems like QQQ outperformed VTI in the past 15 years or so and didn't drop as much in March when the market went down. I know QQQ is more tech heavy and have higher expense ratio but giving past performance seems like my money will grow faster if I invest in QQQ. Am I missing anything? I understand past performance doesn't guarantee anything but would like to enjoy the ride and reevaluate when QQQ performance starts to change drastically.

Any suggestions would be appreciated. I'm looking to invest long-term.
dukeblue219
Posts: 858
Joined: Fri Jan 29, 2016 12:40 pm

Re: $50K to invest, VTI or QQQ?

Post by dukeblue219 »

So, there's nothing terribly wrong with QQQ but I would say it's better when partnered with S&P funds or total market. Going all in on Nasdaq didn't work well in 2000 and who knows what will happen with the next crash, whenever that is.

As to buying and waiting for it to underperform, well, understand that you'll never have that day when it becomes clear that you need to move to VTI. There won't be an obvious sign that QQQ is about to underperformed, only the realization one day that you already have. What if it underperformed right from the get-go?

Just a week or so ago I went about 10% QQQ to my taxable account (I'm not messing with my retirement allocations) because I do want to overweight with the tech giants. But I'm not convinced it will beat my far larger VOO holding.
whereskyle
Posts: 1293
Joined: Wed Jan 29, 2020 10:29 am

Re: $50K to invest, VTI or QQQ?

Post by whereskyle »

JHU ALmuni wrote: Wed Apr 22, 2020 1:01 pm I have about $50K to invest and debating if I should invest in VTI or QQQ. I know VTI is more diverse but seems like QQQ outperformed VTI in the past 15 years or so and didn't drop as much in March when the market went down. I know QQQ is more tech heavy and have higher expense ratio but giving past performance seems like my money will grow faster if I invest in QQQ. Am I missing anything? I understand past performance doesn't guarantee anything but would like to enjoy the ride and reevaluate when QQQ performance starts to change drastically.

Any suggestions would be appreciated. I'm looking to invest long-term.
The best long-term investment you can make is a U.S. total-market index fund or ETF (i.e., VTI). 15 years of continued outperformance is of course nothing to sneeze at, and QQQ holds great companies (VTI of course holds them as well), but 15 years of outperformance should sound alarms in your head. Remember Reversion to the Mean, the concept that to Jack Bogle explained why no mutual fund outperforms the market forever. If your time horizon is long, why worry about timing in and out of QQQ? You know that the only way to guarantee your fair share of the market's return is to invest in the market as a whole for the long term. If you are willing to risk not earning the market's return, Jack advised that one can invest some funny money. If you are intent on investing in QQQ for the sake of experiencing for yourself whether it continues its impressive run against the odds, I would encourage you to invest 5% of your portfolio in QQQ. Jack would suggest no more. If the itch you want to scratch is particularly strong, I would say up to 10% in funny money is acceptable. Anything more to me is unnecessarily dangerous and can have serious implications on your future behavior as an investor. So, $40-45k in VTI, and $5-10k in QQQ.

For full disclosure, I invest about 5% of my portfolio in VGT+VUG, two etfs with lower ERs and much greater diversification than QQQ that I expect to resemble QQQ if the wind stays in its sails while having less downside risk due to greater diversification.
Last edited by whereskyle on Wed Apr 22, 2020 1:15 pm, edited 2 times in total.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
whereskyle
Posts: 1293
Joined: Wed Jan 29, 2020 10:29 am

Re: $50K to invest, VTI or QQQ?

Post by whereskyle »

dukeblue219 wrote: Wed Apr 22, 2020 1:09 pm So, there's nothing terribly wrong with QQQ but I would say it's better when partnered with S&P funds or total market. Going all in on Nasdaq didn't work well in 2000 and who knows what will happen with the next crash, whenever that is.

As to buying and waiting for it to underperform, well, understand that you'll never have that day when it becomes clear that you need to move to VTI. There won't be an obvious sign that QQQ is about to underperformed, only the realization one day that you already have. What if it underperformed right from the get-go?

Just a week or so ago I went about 10% QQQ to my taxable account (I'm not messing with my retirement allocations) because I do want to overweight with the tech giants. But I'm not convinced it will beat my far larger VOO holding.
(Hopefully) great minds think alike.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
User avatar
sometimesinvestor
Posts: 1271
Joined: Wed May 13, 2009 6:54 am

Re: $50K to invest, VTI or QQQ?

Post by sometimesinvestor »

I think its obvious and you almost certainly know it too since your thoughts are reasonable that no one knows and unless you are a a bold adventurer that you should split your investments and probably rebalance over time. THat should should not produce the best possible result but could produce the best result possible
Robert20
Posts: 239
Joined: Fri Apr 10, 2020 10:51 pm

Re: $50K to invest, VTI or QQQ?

Post by Robert20 »

JHU ALmuni wrote: Wed Apr 22, 2020 1:01 pm I have about $50K to invest and debating if I should invest in VTI or QQQ. I know VTI is more diverse but seems like QQQ outperformed VTI in the past 15 years or so and didn't drop as much in March when the market went down. I know QQQ is more tech heavy and have higher expense ratio but giving past performance seems like my money will grow faster if I invest in QQQ. Am I missing anything? I understand past performance doesn't guarantee anything but would like to enjoy the ride and reevaluate when QQQ performance starts to change drastically.

Any suggestions would be appreciated. I'm looking to invest long-term.
I would put in VTI blindly... Also not lump sum payment.

I will invest probably 1K daily weekly or 2K weekly basis...
User avatar
1789
Posts: 1867
Joined: Fri Aug 16, 2019 3:31 pm

Re: $50K to invest, VTI or QQQ?

Post by 1789 »

JHU ALmuni wrote: Wed Apr 22, 2020 1:01 pm I have about $50K to invest and debating if I should invest in VTI or QQQ. I know VTI is more diverse but seems like QQQ outperformed VTI in the past 15 years or so and didn't drop as much in March when the market went down. I know QQQ is more tech heavy and have higher expense ratio but giving past performance seems like my money will grow faster if I invest in QQQ. Am I missing anything? I understand past performance doesn't guarantee anything but would like to enjoy the ride and reevaluate when QQQ performance starts to change drastically.

Any suggestions would be appreciated. I'm looking to invest long-term.
You are not alone. It actually becomes funny when people who likes QQQ only likes 15-10 year of past data but not like 20 years of past data. Why? Isn't that period (1999-2002) crucial to see what happened? You can see that in last 20 years QQQ underperformed a simple US TSM. But, since you like past data, you can buy this fund FSCSX instead of QQQ.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
User avatar
22twain
Posts: 2647
Joined: Thu May 10, 2012 5:42 pm

Re: $50K to invest, VTI or QQQ?

Post by 22twain »

JHU ALmuni wrote: Wed Apr 22, 2020 1:01 pm I have about $50K to invest
Context is important. Is this a major part of your investable assets, or is it merely 5%-10% "play money"?
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
User avatar
ruralavalon
Posts: 20156
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: $50K to invest, VTI or QQQ?

Post by ruralavalon »

JHU ALmuni wrote: Wed Apr 22, 2020 1:01 pm I have about $50K to invest and debating if I should invest in VTI or QQQ. I know VTI is more diverse but seems like QQQ outperformed VTI in the past 15 years or so and didn't drop as much in March when the market went down. I know QQQ is more tech heavy and have higher expense ratio but giving past performance seems like my money will grow faster if I invest in QQQ. Am I missing anything? I understand past performance doesn't guarantee anything but would like to enjoy the ride and reevaluate when QQQ performance starts to change drastically.

Any suggestions would be appreciated. I'm looking to invest long-term.
I suggest using Vanguard Total Stock Market ETF (VTI) because (1) more diversified, with a (2) lower expense ratio, and over the long term total stock market has had both a (3) better return and (4) lower volatility. Portfolio Visualizer, 2000-2020.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Post Reply