of Invesco QQQ (QQQ -0.32%) has been the best performing index-based exchange traded fund (ETF) for many years. ETFs track popular stocks. Nasdaq-100 An index consisting of the top 100 stocks traded on the Nasdaq Stock Exchange.
Invesco QQQ is S&P500 It's up more than 400 percentage points since its inception in 1999, but is that enough to make an ETF millionaire? Let's find out.
technology focused
Investments in Invesco QQQ are primarily investments in the technology sector. About 60% of the ETF's holdings are classified as technology stocks. This is not a bad thing, as technology companies have been leading the market for the past few decades.
In fact, many of the world's largest companies are now technology or technology-adjacent companies. Eight of the top 10 holdings in the S&P 500, which is made up of the 500 largest companies traded in the United States, fall into this category. Technology is changing the world we live in, and as a result, technology companies have grown to become some of the largest companies in the world.
Meanwhile, we seem to be in the early stages of the next big technology trend with artificial intelligence (AI). Generative AI, which can create content based on user questions and prompts, is in its infancy and is beginning to permeate our lives. This can be seen in cases such as asking a question to ChatGPT and getting an answer. using alphabetUse Veo 2 to create videos using only text. or using microsoft365 co-pilots can help you complete tasks at work faster. Additionally, companies are already starting to implement the next wave of AI using agent AI. Agent AI allows an AI agent to go out and complete takes autonomously under given parameters with little to no human involvement.
Invesco QQQ is a great way to invest in many of the top companies that ride these trends. Its top holdings are heavily focused on companies that are beginning to benefit from AI. This includes: apple (9.4% weighting), Nvidia (8.8%), Microsoft (8.1%), Amazon (6%), alphabet (5.7%), broadcom (4.5%), tesla (3.7%), and meta platform (3.4%). costco is the company's largest non-tech stock, with a weight of 2.6%.
This focus on large-cap tech stocks has delivered huge returns over the years. Over the past 10 years, the QQQ ETF has generated a cumulative return of 435.9%, easily outperforming this. S&P500's (SNPINDEX: ^GSPC) The return for the same period was 242.5%. This corresponds to an average annual return of 18.3% for the ETF over that period. The average annual return over the past five years was 19.9%, compared to the S&P 500's 14.5%.
This outperformance didn't just come from one or two years of big outlier performance. According to Invesco, the QQQ ETF has outperformed the S&P 500 87% of the time over the past 10 years based on a monthly movement period.
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Is Invesco QQQ ETF a millionaire maker?
Even if the QQQ ETF has had impressive returns over the past 10 years, a small investment will not turn into $1 million in 10 years. Ten years ago it would have been worth the $10,000 investment. $53,591 Currently (as of the end of 2024).
The key to QQQ ETF turning investors into millionaires is consistent investing using dollar-cost averaging. This is investing in an ETF at regular intervals regardless of price, allowing investors to ride the market when it's rising and pile into more stocks when the market is falling. . In the long run, this is a proven strategy that helps accumulate wealth.
If you made an initial investment of only $10,000 and invested an additional $1,000 at the end of every month for the next 20 years, your investment would be worth about $1 million, with an average annual rate of return of 12%. On the other hand, about 75% of that will come from market profits. Please note that actual returns will vary depending on market fluctuations over the period. However, this will give you a good idea of how long you need it.
Overall, the Invesco QQQ ETF has a long track record of proven outperformance, making it a good investment option, albeit with a decidedly aggressive side given its heavy weighting in tech stocks. . Now that ETFs have pulled back a bit from their recent highs, now might be the best time to start investing for the long term.
Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Geoffrey Seiler holds positions at Alphabet and Invesco QQQ Trust. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
