Know about the Invesco QQQ ETF
ETFs or exchange-traded funds are a favorite for investors who want to invest in the US markets. They offer several benefits. First, ETFs let investors diversify their portfolios across different assets, sectors, or themes. Also, they are cost-efficient and are well-suited for long-term investments. For the beginner investor who may not have the expertise to pick individual stocks, ETFs could be a good way to get started with investing in the US.
In this blog, we will take a look at one of the most popular ETFs in the US- the Invesco QQQ ETF. Launched in 1999, it had Assets Under Management of $172.60 billion as of 11 March 2022. On the same day, the QQQ stock price was $323.34. Here are five things to know about the Invesco QQQ ETF.
1. It tracks the Nasdaq-100 index
The Invesco QQQ ETF tracks the Nasdaq-100 index. By investing in this ETF, one can invest in the 100 largest domestic and international non-financial companies listed on the Nasdaq. This is an easy way to get such an exposure, as otherwise, one would have to buy all the 100 stocks separately.
2. QQQ holdings include the major tech stocks
The top holdings of the Invesco QQQ ETF consist of some of the largest and the most innovative tech companies in the world such as Apple Inc, Microsoft, Amazon, Tesla, Alphabet, Meta Platforms, and Nvidia. So, by investing in a single ETF, an investor can get exposure to companies that are at the forefront of innovation in long-term themes such as augmented reality, cloud computing, big data, mobile payments, electric vehicles, and more.
3. It is the second most traded ETF in the US
When picking an ETF, one of the things to look out for is the trading volume. Higher trading volumes mean higher liquidity. High liquidity means that you will not face any hurdles when buying/selling the ETF. The QQQ ETF was the 2nd most traded ETF in the US based on trading volumes as of December 31, 2021, with its 30-day average trading volume at 79.90 million.
4. It is not purely a tech fund
The Invesco QQQ ETF is more than a tech fund. Its underlying holdings are spread across multiple sectors and industries. As of December 31, 2021, Information Technology (50.97%), Communication Services (18.38%), Consumer Discretionary (16.13%), Health Care (5.66%), Consumer Staples (5.14%), and Industrials and Utilities (3.65%) werethe sector allocations of the QQQ ETF.
5. It has a low expense ratio
When investing in an ETF, the total expense ratio (TER) is an important consideration. The TER is the total cost associated with managing the fund. A lower TER means lesser returns are lost in fees. Being a passively managed ETF, the Invesco QQQ has a TER of 0.2%.
When any stocks listed on the Nasdaq gets big, they will find their way into the Nasdaq-100 and into the QQQ ETF. Hence, this could be a good option for those who want to invest in the companies that have grown large and are leaders in their field. However, it is important to consider factors such as risk appetite and asset allocation before investing.