Investing in the Nasdaq: The Invesco QQQ ETF as a Top Choice for the New Year

When people talk about investing in the Nasdaq, they might mean a couple of different things. Some might be referring to the Nasdaq Composite, which includes almost all stocks listed on the Nasdaq exchange. Others might be thinking of the Nasdaq-100, which tracks the 100 largest non-financial companies within the Nasdaq Composite index.

Which option is better really depends on individual preference. The Nasdaq Composite consists of a vast array of over 2,500 companies and is much more diversified, while the Nasdaq-100 focuses on the biggest names within the market.

As we approach the new year, one exciting investment opportunity stands out: the Nasdaq-100 exchange-traded fund (ETF), specifically the Invesco QQQ Trust (QQQ). This ETF is highly regarded within the stock market and has a history of impressive returns over many years.

The Growth Potential of Key Holdings in the ETF

The QQQ ETF is organized by market capitalization, meaning larger companies have a greater influence on its performance. This structure has allowed for significant gains from a few megacap technology stocks. The top 10 holdings in this ETF are as follows:

Company	Percentage of the ETF
Apple	8.96%
Nvidia	7.88%
Microsoft	7.83%
Amazon	5.62%
Meta Platforms	5.12%
Broadcom	4.89%
Tesla	4.61%
Costco Wholesale	2.70%
Alphabet (Class A)	2.58%
Alphabet (Class C)	2.48%

Currently, these 10 companies account for over 52% of the ETF, indicating that it's not the most diversified fund. However, these corporations have substantial growth potential looking ahead to 2025 and beyond. The key trends influencing their growth include artificial intelligence (AI), cloud computing, and electric vehicles (EV).

AI is becoming integral to numerous industries. Companies like Nvidia and Microsoft are pivotal in providing technology for AI applications ranging from graphics processing units (GPUs) to data centers and machine learning tools.

In terms of cloud computing, major players like Amazon, Microsoft, and Alphabet dominate the market, with market shares of about 31%, 20%, and 11%, respectively.

The global EV market is projected to grow from over $500 billion in 2023 to nearly $1.9 trillion by 2032, reflecting a compound growth rate of around 14%. Tesla, as the only EV manufacturer in the ETF's top 10, also depends on various partners for its hardware and software needs.

Outstanding Historical Performance of the ETF

The Invesco QQQ Trust has performed remarkably well since its inception in March 1999, accumulating a return of more than 930% as of December 12. That translates to an average annual return of roughly 9.5%, surpassing the performance of the S&P 500. If one had invested $1,000 in the ETF back then, it would be valued at over $10,300 today.

While past performance doesn't guarantee future results, it is reassuring to see how the ETF has weathered various tough market conditions, including the dot-com bubble burst, the Great Recession, and the COVID-19 pandemic.

Another attractive feature of this ETF is its low expense ratio of just 0.2%, which translates to $2 for every $1,000 invested annually. While not as low as some S&P 500 ETFs (like a certain Vanguard option at 0.03%), it remains an affordable choice overall.

Though costs may not be the first consideration when picking an ETF, even minor differences can amount to thousands of dollars in returns over time. With its solid track record and substantial growth opportunities for its top companies, the Invesco QQQ ETF represents a sensible choice for those looking to invest in the Nasdaq.

Nasdaq, ETFs, Investment