Is the Invesco QQQ ETF a Millionaire Maker?

The Invesco QQQ (QQQ -0.32%) has established itself as one of the top-performing exchange-traded funds (ETFs) over the years. This ETF follows the Nasdaq-100 index, which includes the 100 largest stocks trading on the Nasdaq stock exchange.

Since its inception in 1999, the Invesco QQQ claims to have outperformed the S&P 500 by more than 400 percentage points. However, this raises the question: Can the QQQ ETF truly make investors millionaires? Let's explore.

Technology Focus

Investing in the Invesco QQQ means primarily putting money into the technology sector, which makes up about 60% of its holdings. This focus on tech is beneficial, as technology firms have taken the lead in market performance over the past few decades.

Remarkably, many of the world’s largest companies now fall into the tech or tech-related categories. Among the top ten holdings in the S&P 500, eight are technology-oriented companies, highlighting the sector's significant impact. Technologies are continuously reshaping our lives, with tech companies becoming the largest market players as a result.

Currently, we are witnessing the early stages of a major technology transition centered around artificial intelligence (AI). Generative AI—capable of producing content based on user queries—has just started to integrate into our daily routines. Applications like ChatGPT, Alphabet's Veo 2 for video creation, and Microsoft's 365 copilot showcase this trend. The next frontier, agentic AI, is emerging as it enables AI systems to autonomously complete tasks with little human input.

The Invesco QQQ presents a solid opportunity to invest in many leading companies capitalizing on these technological trends. Its major holdings include Apple (9.4% weighting), Nvidia (8.8%), Microsoft (8.1%), Amazon (6%), Alphabet (5.7%), Broadcom (4.5%), Tesla (3.7%), and Meta Platforms (3.4%). The only notable non-tech holding is Costco at 2.6%.

This concentration in prominent tech stocks has resulted in significant returns over time. Over the last decade, the QQQ ETF's cumulative performance has soared by 435.9%, far exceeding the S&P 500’s 242.5% return during the same period. This translates to an average annual return of 18.3%. The past five years have been even stronger, with an average annual return of 19.9%, compared to 14.5% for the S&P 500.

This outperformance isn't attributable to just a few standout years. Data from Invesco shows that the QQQ ETF has surpassed the S&P 500 approximately 87% of the time over the last ten years when evaluated on a rolling monthly basis.

Can the Invesco QQQ ETF Create Millionaires?

Despite its excellent returns in the past decade, the QQQ ETF won't instantly transform a small investment into $1 million over a mere ten years. For instance, a $10,000 investment made ten years ago would be valued at $53,591 at the end of 2024.

The crucial strategy for maximizing the QQQ ETF's potential in creating millionaires lies in consistent investing through methods like dollar-cost averaging. This approach involves investing in the ETF at regular intervals regardless of the share price, allowing investors to benefit from market gains when prices rise and accumulate more shares when prices fall. Over time, this strategy has proven effective for building wealth.

If an investor were to make an initial investment of $10,000 and additionally invest $1,000 at the end of each month over 20 years, their investment could approach $1 million, assuming a 12% average annual return. It’s important to note that the majority—around 75%—of this potential wealth would arise from market gains. Actual returns will vary with market fluctuations, but this illustrates the timeframe required for significant growth.

Overall, the Invesco QQQ ETF has a lengthy history of exceptional performance, making it an attractive investment choice. However, potential investors should acknowledge its aggressive nature due to its high allocation in tech stocks. Given the recent pullback from its peak, now may be an opportune moment to consider investing for the long run.

Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is also a board member. Randi Zuckerberg, former market development director and spokesperson for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, serves on the board too. Geoffrey Seiler holds positions in both Alphabet and Invesco QQQ Trust. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Nvidia, and Tesla. It also recommends Broadcom and lists long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

investment, technology, ETF