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No. of Recommendations: 11
According to Mr. Google QQQ looks much, much better than QQEW. Especially over the past decade.

Sure, but the recent investment performance isn't my point.
The good figures are really just saying that a couple of firms have done very very well in recent years, which doesn't tell us much about the future.

QQQ is kind of a dumb investment. It's not cap weight, and it's not NOT cap weight.
Its holdings are so skewed that your money is really a wager on a very small number of firms. Just three firms make up over a third of it.
If you know and like the prospects of those top few firms, you should just buy them.
If you don't have a knowledgeable view about their individual prospects, the vastly lower concentration risk of the equal weight version is more sensible.
(top three firms at 3% of your money is much less risky than top three firms at 34%)
So, that leaves QQQ an appropriate investment choice for pretty much nobody.

Secondarily, because of the weighting skew, the performance of QQQ can't support any attempt at extrapolation.
Individual firms are not nearly as predictable as broad classes of firms.
The equally weighted set is broad enough that we at least have some clue that its aggregate economic
characteristics are statistical rather than idiosyncratic, and so might (might) tell us something useful about the future.

Here's an approximation of the inflation-adjusted earnings per "share" of the equal weight Nasdaq 100 set.
It's not really right, but it's close enough to give a good idea.
(each figure is actually the daily average through the year, itself calculated is a slightly roundabout way)
1997   $24.52
1998 24.20
1999 27.58
2000 29.10
2001 13.43
2002 5.74
2003 16.17
2004 22.34
2005 28.80
2006 30.43
2007 36.83
2008 37.29
2009 33.20
2010 42.12
2011 54.58
2012 57.14
2013 58.19
2014 63.46
2015 69.47
2016 64.58
2017 74.93
2018 77.87
2019 89.61

There is obviously a big dip in the bust after the tech bubble.
The index rules requires that they include the largest non-financial Nasdaq firms by market cap, which for a while was a set of firms untethered from any notion of profit prospects.
Consequently if you build a trend line through this table it's too optimistic because of the very low figures way back then.
For conservatism, if you zap out 2001-2004, what remains is a remarkably steady trend line rising at inflation+6.15%/year.
Extrapolation is not entirely reliable, but it has been going on for a while, and that figure dwarfs what the S&P 500 can manage.

Jim
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