Between The VTI and QQQ, Which Is Better For Retirement?

With the broad U.S. equity markets — most notably, the S&P 500 and Nasdaq 100 — attempting to stage a comeback after a rapid move into correction, new investors with extra money to put to work may wonder which major index is the better buy right here. Undoubtedly, there’s a lot of risk on the table as pundits weigh the next move with Trump tariffs. A high level of fiscal and monetary policy uncertainty seems like the perfect mix for an overwhelmingly choppy market.

Either way, the Fed allowed investors to take a breather on Wednesday’s session, as it left interest rates unchanged while signaling two rate cuts for the year. Indeed, the market liked what they heard, and while a so-called “Trumpcession” may still come to fruition, it certainly seems like value investors are willing to step in and brave the recent wave of market turbulence despite the potential for more inflation, a recession, or even both — stagflation. Even as some big banks reduce their price targets on the S&P 500 for 2025, playing the long game with stocks still seems like a wise move, especially for younger investors.

But should new investors embrace more risk and double down on tech (and AI) on weakness with the Nasdaq 100 — Invesco QQQ Trust (NASDAQ:QQQ) — or stick with a more diversified, balanced Vanguard Total Stock Market Index Fund ETF (NYSEARCA:VTI), an ETF that’s even more diversified than the S&P 500 (with more holdings and a decent amount of mid-cap exposure).

Let’s check in to see which incredibly popular ETF would be the better fit for the long haul:

The case for the Vanguard Total Stock Market Index Fund

For most investors, the VTI is good enough to get the job done. It’s a broad market index fund that’s even broader than the more popular S&P 500 index, with exposure to thousands of names, including mid-cap stocks not found in the S&P 500.

For investors who want a bit of everything, the VTI can be a better bet than the S&P 500. And while the broader exposure is no guarantee of outperformance, I do think that a rotation out of the mega-cap darlings and into less-appreciated names across the market could help the VTI gain a bit of an edge. Either way, the VTI and an S&P 500 ETF seem like great bets together. 

If you’re already heavily exposed to the tech stocks and don’t want to be hit with amplified damage on the way down (let’s say this correction isn’t over with yet), the VTI may be the favored option, with a beta of around 1.0 versus the 1.16 for the QQQ. Indeed, the VTI stands to fall far less than the QQQ on the way down. But once the tides turn, it’s the QQQ that could, once again, lead the way.

The case for the Invesco QQQ Trust

If you want to double down on technology names, many of which have been far harder than the market (some are down over 20-25%), the QQQ is the way to go. From peak to trough, the QQQ fell just over 13% from its highs compared to the VTI, which sank just north of 10%.

Indeed, bargain hunters who are undeterred by the recent weakness in the tech sector and still can’t get enough of the Magnificent Seven — as well as the top 100 stocks within the Nasdaq index — may opt for the QQQ over the VTI. Indeed, if higher risks for higher growth are a worthwhile trade amid this correction, the QQQ may very well be the better deal. The AI boom is still in play, even though it’s not as talked about as tariffs.

All considered, I don’t think you could go wrong with either the VTI or QQQ for retirement, especially at a 10% or so discount from peak levels.

For most investors who don’t want to take extra damage if this correction turns into a crash, the VTI stands out as the better bet. However, if you’re going out of your way to scoop up higher-growth, higher-tech names, the QQQ may seem like the slightly better deal while it’s off slightly more.

The post Between The VTI and QQQ, Which Is Better For Retirement? appeared first on 24/7 Wall St..