The Invesco QQQ (QQQ – Free Report) was launched on 03/10/1999, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Growth segment of the US equity market.
The fund is sponsored by Invesco. It has amassed assets over $202.16 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. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
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. Further, growth stocks have a higher level of volatility associated with them. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.
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%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 0.58%.
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 50.30% of the portfolio. Telecom and Consumer Discretionary round out the top three.
The top 10 holdings account for about 58.87% 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 roughly 38.98% so far this year and was up about 18.20% in the last one year (as of 08/24/2023). In the past 52-week period, it has traded between $260.10 and $385.74.
The ETF has a beta of 1.10 and standard deviation of 24.68% for the trailing three-year period, making it a medium risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.
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 $70.44 billion in assets, Vanguard Growth ETF has $91.65 billion. IWF has an expense ratio of 0.19% and VUG charges 0.04%.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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