SPY vs QQQ: Picking a Fair Benchmark

SPY tracks the S&P 500, about 500 large US companies across every sector, while QQQ tracks the Nasdaq 100, the 100 largest non-financial companies on the Nasdaq exchange, with a heavy tilt toward technology. QQQ has risen faster than SPY since 2010 but has also had deeper falls in tech-led crashes. A fair benchmark is the one that matches what a strategy actually holds: compare tech-heavy strategies with QQQ, broad US strategies with SPY, and gold strategies with gold.

This post compares the two funds and then shows how benchmark choice can make the same strategy look modest or spectacular.

What each fund holds

Both are exchange-traded funds that track an index, both are among the most traded funds in the world, and both pay small dividends. That is roughly where the similarity ends.

Because the biggest technology companies sit in both indexes, the two funds often move in the same direction on the same day. The difference shows up in how far they move and in which sectors drive them. When banks, energy or industrials lead, SPY tends to hold up better. When large tech leads, QQQ tends to pull ahead.

How they have compared over time

The long-run record depends heavily on which years you look at.

In the period since 2011, QQQ has done better. Using the same data that sits behind our strategy tests, from January 2011 to November 2026, the S&P 500 (SPY) returned +14.0% a year with a worst fall of 34%, and the Nasdaq 100 (QQQ) returned +18.3% a year with a worst fall of 35%. These come from the same historical price data used for our strategy tests. Over that stretch, QQQ delivered more return for a similar worst fall.

The longer history tells a different story. In the dot-com crash of 2000-2002, the Nasdaq 100 lost most of its value, a far deeper fall than the S&P 500's 47%, and it took many years longer to recover. Someone who chose QQQ as their benchmark in early 2000 had a very different decade from someone who chose SPY.

Concentration is the hidden difference

Both indexes weight companies by their market value, so the largest companies get the largest share. In the Nasdaq 100, with only about 100 members, the top handful of companies make up a very large slice of the whole index. That means QQQ's results depend heavily on how a few giant companies do in any given year.

SPY is more spread out, but it has become more concentrated too, because the same giant tech companies are also the biggest members of the S&P 500. In years when those few companies dominate, the two funds behave more alike than their names suggest. In years when the rest of the market leads, SPY's wider spread shows.

For benchmark purposes, this means QQQ is partly a bet on a small group of companies. A strategy that owns those same companies should not get credit for that bet when it is compared with SPY.

The takeaway is not that one fund is better. It is that their relative performance is driven by which sectors lead, and that can change for long periods.

Why the benchmark period must match exactly

A fair comparison uses the same start date, end date and assumptions for the strategy and the benchmark. Even small differences in dates change the numbers. Our own strategy tests start on slightly different dates, and the benchmark results shift with them:

Starting ten months later added about a percentage point a year to both benchmarks, because it skipped a weak stretch in 2011. A strategy tested from November 2011 and compared with a benchmark measured from January 2011 would look about a point better than it should. This is one of the easiest ways for a comparison to mislead, often without anyone intending it. Our guide on how to read a backtest covers this and other traps.

How to pick a fair benchmark

A benchmark answers one question: what could someone have earned with a simple, cheap alternative that has similar exposure? The best benchmark is the one a sensible person would have chosen instead.

Match the holdings

If a strategy holds mostly technology stocks or Nasdaq-based funds, QQQ is the closer match. Comparing a tech strategy with SPY credits the strategy for the tech sector's performance, which anyone could have had by buying QQQ.

If a strategy holds a broad mix of US stocks or switches between the S&P 500 and other assets, SPY is the natural comparison.

If a strategy trades something else entirely, neither fund fits. A gold strategy should be compared with holding gold.

Match the risk

A strategy that uses leverage should not only be compared with an unleveraged index on returns. It should also be compared on falls and recovery times, because leverage raises both. A strategy that made twice the index's return with three times its worst fall has not clearly done better; it has taken a different amount of risk.

Benchmarks for leveraged strategies

Leveraged strategies raise a harder question. If a strategy holds TQQQ part of the time, is QQQ really the right comparison, or should it be a 3x fund held throughout? There is no perfect answer. QQQ shows what plain, unleveraged exposure would have earned with far less risk. A permanently held 3x fund shows what leverage alone would have done, but it suffers heavy decay in choppy years, as explained in our post on leveraged ETF decay, so it is a moving and unflattering target.

The practical approach is to compare with the plain index and then look hard at the risk numbers. If a leveraged strategy's worst fall is much deeper than QQQ's, the higher return came with a price, and that price should be visible in the same table.

Show more than one when in doubt

When a strategy's holdings straddle both indexes, showing both is the honest approach. If the strategy only looks impressive against the weaker of the two, that is worth knowing.

Applying this to our five strategies

Here is how we pair each strategy with a benchmark, and why.

We show both stock benchmarks for every US strategy, because none of them fits perfectly into one index.

Example: how much the benchmark changes the story

Take Big Tech Trend. In a historical backtest from January 2011 to November 2026, a computer test on past prices that nobody earned, it returned +37.3% a year with a worst fall of 29%. Against SPY's +14.0%, the gap looks like more than 23 percentage points a year. Against QQQ's +18.3%, it is about 19 points. Both comparisons are accurate, but QQQ is the fairer one because the strategy mostly holds tech. And both need the strategy's caveat: the stock list was chosen with hindsight, and three stocks made 81% of the profit. Future results will differ.

The same logic applies in reverse. Steady Growth holds names across health care, retail, industrials, gold and one chip maker, so SPY is a closer match even though comparing with QQQ would make it look a bit less strong.

Common benchmark tricks to watch for

When you read any strategy's results, from us or anyone else, these are the patterns that make a comparison less fair than it looks:

• The weakest benchmark. Comparing a tech strategy only with the S&P 500, or a stock strategy only with bonds.
• Mismatched dates. Strategy and benchmark measured over different windows, even slightly.
• Price-only benchmark. Leaving dividends out of the benchmark's return while the strategy gets credit for every gain. It is worth checking whether both sides are measured the same way.
• Return without risk. Showing yearly returns but not worst falls or recovery times.
• No benchmark at all. A big number on its own says nothing about whether the strategy added anything beyond what the market gave. Our post on trading bot red flags lists more warning signs.

Related reading: investing for beginners and how to compare the best investments.

Key takeaways

• SPY tracks about 500 large US companies across sectors; QQQ tracks the 100 largest non-financial Nasdaq companies and leans heavily to tech.
• From 2011 to 2026, QQQ returned +18.3% a year against SPY's +14.0%, with similar worst falls, but in the dot-com crash the Nasdaq 100 fell far more.
• A fair benchmark matches the strategy's holdings and is measured over the exact same dates.
• Moving the start date by ten months shifted both benchmarks by about a point a year, which is enough to flatter a comparison.
• Compare falls and recovery times as well as returns, especially for leveraged strategies.

This is general education, not personal advice.

Compare strategies with their benchmarks yourself

AlgolaneBots shows every strategy next to its benchmark, and you can watch both move with real prices on a $10,000 paper account during a free 90-day trial, no card required. Sign up and start on paper, or see how we handle risk disclosure.