US ETFs head-to-head: Vanguard S&P 500 vs Invesco EQQQ NASDAQ-100

The US stock market has more exchange-traded funds (ETFs) covering it than any other and among AJ Bell DIY investors, two of the most popular options are the Vanguard S&P 500 vs Invesco EQQQ NASDAQ-100.

The Vanguard fund is the most widely held ETF among AJ Bell investors, period, meanwhile the Invesco fund is the seventh most popular.

AJ Bell previously looked into the differences between the most popular ETF and tracker funds covering US equities, which included both these names, but comparing two of the most in-demand names head-to-head is a useful exercise.

Investors love buying the US, especially with passives

The first ETF was launched back in 1990 in Canada covering 35 stocks on the Toronto Exchange. The first US ETF debuted three years later, covering the S&P 500. Today, there are more ETFs listed in the US than there are individual stocks, so ravenous have investors been for these types of product and, increasingly, that has extended to the UK too.

Calastone has been tracking the fund flows of UK investor’s capital since 2018 and one of the most persistent themes is that while money is often being moved out of markets and sectors such as the UK or fixed income, investors continue to move into the US, and they are doing so via passives more and more.

Spot the difference

Looking at the most widely held ETF table above, you’ll notice that there’re some other US-focused ETFs ahead of the Invesco name, specifically the iShares S&P 500 ETF. The reason we’re not using this in the comparison is that it tracks the same underlying benchmark as the Vanguard fund: the S&P 500. Though there will be differences between the two, they are likely to be modest.

The Invesco fund instead tracks the Nasdaq 100 and this is the key difference when picking one or the other because it has a big impact on your total returns, and how well diversified your portfolio ends up being.

The S&P 500, and therefore the Vanguard fund, is the more diverse of the two as it covers the 500 largest US-listed stocks.

Because this index covers such a large swathe of the equity market it’s used as the main benchmark for the US stock market.

The Nasdaq is the main listing venue for tech companies in the US and the Nasdaq 100 contains the largest companies on that market.

While both feature the likes of Apple, Nvidia and Alphabet, the Nasdaq excludes sectors like financials, so Warren Buffett’s Berkshire Hathaway and JPMorgan Chase, which feature in the S&P 500’s top 10, are nowhere to be seen in the Nasdaq 100.

These differences inevitably have a sizeable impact on the indices’ returns, and the funds that track them. This has been largely to the benefit of the Nasdaq over the last decade or so as US tech stocks have dominated markets during that time. But in recent months, when the AI-spending story has become a source of market concern, the S&P 500 has fared better.

Over 10 years, the Nasdaq 100 has a total return nearly double that of the S&P 500.

This outperformance has been consistent over shorter time periods, but it’s narrowed and in the last month the S&P 500 has marginally outperformed the Nasdaq 100.

New inclusion rules could matter for IPOs

Changes to how companies join these indices could also impact which ETF is right for you.

Earlier this year, Elon Musk’s SpaceX made the biggest public market debut ever with a $1.78 trillion valuation.

There are specific rules about how and when a company is included in an index once it’s gone public, which matters a lot for ETFs and tracker funds since they’re designed to replicate whichever market they’re tracking, making them ‘forced buyers’.

Historically, a stock had to wait months before it was included in the Nasdaq 100 but in the run-up to the SpaceX IPO an accelerated entry system was introduced which allowed SpaceX to join after just 15 days.

The rules for inclusion in the S&P didn’t change meaning at least a 12-month wait from the date of its IPO before SpaceX could be eligible.

Discover what the new listing rules could mean for your tracker in our latest article.

This sets a precedent for any future IPOs, and 2026 could be due a few more record breakers as both Claude creator Anthropic and ChatGPT’s parent company OpenAI are expected to go public later this year.

It's not guaranteed and there may be more rule changes to come, but, if things stayed as they are, investors in the Vanguard fund and other S&P 500 trackers would not have exposure to these AI titans while Nasdaq-focused products would.

What about costs?

The difference in cost between these ETFs is material, with the Vanguard fund having ongoing charges of 0.07% compared with 0.3% for the Invesco product.

While the Nasdaq 100 is a commonly tracked benchmark, it’s more specialised than the broad-based S&P 500. ETFs tracking more specific benchmarks tend to command a slightly higher ongoing charge than ones tracking a more broad-based index, and Invesco’s cost is in line with its peers.

The Vanguard fund also faces more competition as the S&P 500 is the most heavily tracked equity market in the world, and with little to no performance variance, fees are the main way providers can try and capture investors’ interest.