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Should Invesco QQQ (QQQ) Be on Your Investing Radar?

Looking for broad exposure to the Large Cap Growth segment of the US equity market? You should consider the Invesco QQQ (QQQ), a passively managed exchange traded fund launched on 03/10/1999.

The fund is sponsored by Invesco. It has amassed assets over $174.63 billion, making it the largest ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Companies that find themselves in the large cap category typically 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.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Additionally, growth stocks have a greater level of risk associated with them. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.20%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.52%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, 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 50.90% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Microsoft Corp (MSFT) accounts for about 10.88% of total assets, followed by Apple Inc (AAPL) and Amazon.com Inc (AMZN).

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 lost about -18.31% so far this year and is up roughly 3.46% in the last one year (as of 03/16/2022). In the past 52-week period, it has traded between $311.33 and $403.99.

The ETF has a beta of 1.05 and standard deviation of 25.82% 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 a great 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) and the Vanguard Growth ETF (VUG) track a similar index. While iShares Russell 1000 Growth ETF has $64.79 billion in assets, Vanguard Growth ETF has $74.77 billion. IWF has an expense ratio of 0.19% and VUG charges 0.04%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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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Invesco QQQ (QQQ): ETF Research Reports
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
 
Vanguard Growth ETF (VUG): ETF Research Reports
 
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