Is QQQ an ETF or index fund?
The Invesco QQQ ETF is an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index. Because it passively follows the index, the QQQ share price goes up and down along with the tech-heavy Nasdaq 100. Passive management keeps fees low, and investors are rewarded with the full gains of the volatile index if it rises.
For investors seeking an alternative to QQQ's mega-cap exposure, the Invesco S&P 500 Top 50 ETF (XLG) is an excellent option.
As of the end of 2023, QQQ has generated a respectable annualized total three-year return of 10.0%. Looking further out, QQQ's results have been even more impressive. As of December 31, QQQ's annualized five-year return stands at a phenomenal 22.4%, and its annualized 10-year return clocks in at a gaudy 17.7%.
The Invesco QQQ Trust (QQQ -0.13%) is one of the most popular exchange-traded funds (ETFs) on the market with just under $200 billion in assets under management. As an ETF that tracks the performance of the Nasdaq-100 index, it has delivered some of the best long-term returns since it came into existence in 1999.
The biggest difference between ETFs and index funds is that ETFs can be traded throughout the day like stocks, whereas index funds can be bought and sold only for the price set at the end of the trading day. For long-term investors, this issue isn't of much concern.
Invesco QQQ Trust ETF (QQQ)
This ETF started trading in 1999, and it's managed by Invesco, a fund giant. This fund is the top-performing large-cap growth fund in terms of total return over the 15 years to September 2023, according to Lipper. Expense ratio: 0.20 percent.
The problems with Invesco QQQ Trust
The number one biggest problem with Invesco QQQ Trust is that a small number of stocks make up a large percentage of the fund. That's not the fund's fault, it is simply tracking the index. But you can't ignore this lack of diversification.
Invesco QQQ — the ETF that tracks the Nasdaq-100 index — has beaten the S&P 500 nine out of the last 10 years. Source: Morningstar Inc. Data begins 10 years prior to the ending date.
One of the bigger winners of 2023 has been the Invesco QQQ ETF (NASDAQ: QQQ), which mirrors the Nasdaq-100 index. The Nasdaq-100 tracks the 100 largest nonfinancial stocks trading on the Nasdaq stock exchange. Its popularity has made it the second-most traded ETF in the U.S., based on daily volume traded.
Invesco QQQ stock price stood at $428.45
According to the latest long-term forecast, Invesco QQQ price will hit $500 by the middle of 2024 and then $600 by the middle of 2025. Invesco QQQ will rise to $700 within the year of 2027, $800 in 2028, $900 in 2029, $1000 in 2031, $1100 in 2033 and $1200 in 2035.
Is QQQ still a good buy?
Trading levels for QQQ
QQQ holds several positive signals and is within a strong rising trend. As the old saying says, "Let the trend be your friend. '". We therefore consider it to be a good choice at these current levels and we are expecting further gains during the next 3 months.
| ETF | Assets under management | Expense ratio |
|---|---|---|
| Invesco QQQ Trust (ticker: QQQ) | $244 billion | 0.2% |
| VanEck Semiconductor ETF (SMH) | $14 billion | 0.35% |
| Consumer Discretionary Select Sector SPDR Fund (XLY) | $19 billion | 0.09% |
| Global X Uranium ETF (URA) | $3 billion | 0.69% |
QQQ Cons. High bear market risk: Just as QQQ tends to outperform the S&P 500 during bull markets, it also often underperforms it during bear markets.
Invesco Nasdaq 100 ETF (QQQM)
"Historically, these investments have potential for higher growth over time that you will generally pay no taxes on when held in a Roth IRA." A great example is QQQM, which tracks the Nasdaq-100 Index.
That said, regardless of how lucrative the Invesco QQQ ETF has been, there are two ETFs I like more going into 2024: the Vanguard S&P 500 ETF (VOO 1.03%) and Vanguard Growth ETF (VUG 2.01%).
If you're new to investing, you can absolutely start off by buying index funds alone as you learn more about how to choose the right stocks. But as your knowledge grows, you may want to branch out and add different companies to your portfolio that you feel align well with your personal risk tolerance and goals.
And, in general, ETFs tend to be more tax efficient than index mutual funds. You want niche exposure. Specific ETFs focused on particular industries or commodities can give you exposure to market niches.
ETFs are more tax efficient than index funds because they are structured to have fewer taxable events. As mentioned previously, an index mutual fund must constantly rebalance to match the tracked index and therefore generates taxable capital gains for shareholders.
Invesco QQQ Trust (QQQ): Historical Returns
In the last 30 Years, the Invesco QQQ Trust (QQQ) ETF obtained a 13.76% compound annual return, with a 24.01% standard deviation. The ETF is related to the following investment themes: Asset Class: Equity. Size: Large Cap.
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.
Should I invest in QQQ or QQQM?
QQQM was welcomed as a better option for investors in the Nasdaq 100 index when launched in 2020. But its low AUM and volume were an initial concern. QQQM's price has outperformed QQQ especially in boom markets and pays a slightly higher dividend. But the outperformance varies from year to year.
Enter the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). For 2024, the S&P 500 is forecast to deliver EPS growth of 11.7%, solidly above the 10-year average of 8.4%. QQQ and QQQM follow the Nasdaq-100 Index. That benchmark has a long history of delivering EPS growth well in excess of the S&P 500.
This index consists of the top 100 stocks, ranked by market capitalization, in the Nasdaq Composite Index. Because of its heavy weighting in tech stocks, QQQ is considered to be an aggressive-growth stock fund.
The QQQ is more broadly diversified than the VGT, but it also comes with a higher expense ratio. So, the argument truly boils down to one of fit. If you are only going with one tech-heavy fund, the QQQ is probably the better choice because it offers a higher diversification factor.
It's expected to decline even further in 2024. This means that the erosion of real income will continue to slow down, which in turn can encourage consumer spending.
