IWM vs. QQQ: The Small-Cap Star ETF Against the Large Growth Fund

Both the Invesco QQQ Trust, Series 1 (NASDAQ:QQQ) and iShares Russell 2000 ETF (NYSEMKT:IWM) are staples for U.S. equity exposure, but they serve distinct roles. QQQ tracks the NASDAQ-100, which is dominated by large technology companies, while IWM tracks the Russell 2000, a broad index of small-cap U.S. stocks. This comparison looks at their costs, returns, risk profiles, portfolio composition, and other key traits to help investors decide which may better fit their goals.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months as of Jan. 22, 2026.

Both IWM and QQQ have similar expense ratios and returns within the past 12 months, while IWM’s dividend yield is substantially higher.

Performance & risk comparison

What's inside

Designed to track the Russell 2000, IWM holds 1956 small-cap U.S. stocks, making it one of the broadest diversification plays among domestic equity ETFs. Its largest sector weights are financials, industrials, and healthcare. Top holdings include Bloom Energy Corp. (NYSE:BE), Credo Technology Group Holding Ltd. (NASDAQ:CRDO), and Hecla Mining Company (NYSE:HL). No stock in the fund carries more than a 1% weight, providing a balanced approach to small-cap stocks.

QQQ, in contrast, is highly concentrated in technology with its top holdings including NVIDIA(NASDAQ:NVDA), Apple(NASDAQ:AAPL), and Microsoft(NASDAQ:MSFT). This concentrated profile means QQQ’s returns are closely tied to the performance of a handful of mega-cap technology companies.

What this means for investors

Investors should be aware of the volatility that each ETF carries. Small-cap stocks are more prone to large price swings because companies may either generate abnormal funds/revenue that can spike returns, or lose more money during economic uncertainty, which can drop prices. Thus, with IWM’s portfolio full of small-cap companies, the ETF’s price can fluctuate dramatically at times.

With QQQ, a heavy reliance on tech stocks can backfire if the sector experiences a market downturn. Also, with the top three companies in the fund’s holdings having substantially more weight, if one of those companies experiences a catastrophic event, investors may very well see that reflected within the fund’s performance.

It should also be noted that because QQQ tracks the Nasdaq, it’s limited to around 100 stocks and to those listed on the NASDAQ. IWM, on the other hand, includes stocks listed on all top U.S. exchanges. Regardless, QQQ is one of the best ETFs for tech exposure, but for a more balanced investment, IWM is a better option.

For more guidance on ETF investing, check out the full guide at this link.

Adé Hennis has positions in Apple and Nvidia. The Motley Fool has positions in and recommends Apple, Bloom Energy, Kratos Defense & Security Solutions, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.