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Should Invesco QQQ (QQQ) Be on Your Investing Radar?
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Designed to provide broad exposure to the Large Cap Growth segment of the US equity market, the Invesco QQQ (QQQ - Free Report) is a passively managed exchange traded fund launched on 03/10/1999.
The fund is sponsored by Invesco. It has amassed assets over $203.95 billion, making it the largest ETFs attempting to match the Large Cap Growth segment of the US equity market.
Why Large Cap Growth
Large cap companies usually have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Further, growth stocks have a higher level of volatility associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.20%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.45%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 50.60% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 10.88% of total assets, followed by Apple Inc (AAPL - Free Report) and Amazon.com Inc (AMZN - Free Report) .
The top 10 holdings account for about 54.9% of total assets under management.
Performance and Risk
QQQ seeks to match the performance of the NASDAQ-100 Index before fees and expenses. The Nasdaq-100 Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.
The ETF has added about 26.67% so far this year and it's up approximately 35.41% in the last one year (as of 11/12/2021). In the past 52-week period, it has traded between $290.11 and $398.60.
The ETF has a beta of 1.03 and standard deviation of 25.51% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco QQQ holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, QQQ is an excellent option for investors seeking exposure to the Style Box - Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Growth ETF (IWF - Free Report) and the Vanguard Growth ETF (VUG - Free Report) track a similar index. While iShares Russell 1000 Growth ETF has $77.78 billion in assets, Vanguard Growth ETF has $88.67 billion. IWF has an expense ratio of 0.19% and VUG charges 0.04%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Should Invesco QQQ (QQQ) Be on Your Investing Radar?
Designed to provide broad exposure to the Large Cap Growth segment of the US equity market, the Invesco QQQ (QQQ - Free Report) is a passively managed exchange traded fund launched on 03/10/1999.
The fund is sponsored by Invesco. It has amassed assets over $203.95 billion, making it the largest ETFs attempting to match the Large Cap Growth segment of the US equity market.
Why Large Cap Growth
Large cap companies usually have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Further, growth stocks have a higher level of volatility associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.20%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.45%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 50.60% of the portfolio. Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 10.88% of total assets, followed by Apple Inc (AAPL - Free Report) and Amazon.com Inc (AMZN - Free Report) .
The top 10 holdings account for about 54.9% of total assets under management.
Performance and Risk
QQQ seeks to match the performance of the NASDAQ-100 Index before fees and expenses. The Nasdaq-100 Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.
The ETF has added about 26.67% so far this year and it's up approximately 35.41% in the last one year (as of 11/12/2021). In the past 52-week period, it has traded between $290.11 and $398.60.
The ETF has a beta of 1.03 and standard deviation of 25.51% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco QQQ holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, QQQ is an excellent option for investors seeking exposure to the Style Box - Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Growth ETF (IWF - Free Report) and the Vanguard Growth ETF (VUG - Free Report) track a similar index. While iShares Russell 1000 Growth ETF has $77.78 billion in assets, Vanguard Growth ETF has $88.67 billion. IWF has an expense ratio of 0.19% and VUG charges 0.04%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.