Looking for a high-growth stock with huge potential, especially since tech stocks get pounded? Action Apple or Microsoft? Amazon.com or Facebook? Why choose? Own them all.
QQQ shares, or Invesco QQQ Trust (QQQ), places the 100 largest Nasdaq stocks in your portfolio in a single transaction. Even better, it leaves out finances, focusing your portfolio on companies in faster-growing sectors. The QQQ is an inexpensive way to own the companies that are building the future economy.
And rather than try to choosing the right technology stock buy and when to buy it, place a trade and you own them all right now.
All this at a minimal fee of just 0.2% per year. Next to a commission war launched in 2019 by Charles Schwab (SCHW), Interactive brokers (IBKR) and TD Ameritrade (AMTD), you can buy this fund commission-free. This means you only pay $20 per year for every $10,000 invested.
How do you board?
What is the QQQ stock?
QQQ stock is the fifth most popular globally listed index fundwhile carrying more than 170 billion dollars in investors’ assets. He follows the Nasdaq-100 Index, which owns the most valuable non-financial stocks on the Nasdaq. QQQ is also the largest ETF that tracks a narrower slice of the stock market. the the largest ETF is the broad stock SPYwhich owns all the shares of the S&P 500.
But although QQQ stock is not a broad market ETF, it holds the most valuable stocks trading on the Nasdaq. This definition means that the QQQ is very technological. Most of the biggest tech stocks are still trading on the Nasdaq. And given that technology remains the best performing sector, giants like Microsoft (MSFT) and Apple (AAPL) plus adjacent technology Amazon.co.uk (AMZN) is only growing in importance in the ETF.
What are the top 10 QQQ stock holdings?
QQQ stock is heavily biased towards megacap technology stocks. All of its top 10 holdings are technology or technology-related companies like Amazon.com.
|Company||Symbol||Weight in stock QQQ|
Source: Invesco as of May 6, 2022
Why is the Nasdaq 100 better than the Dow Jones?
The Nasdaq 100 isn’t as famous as the Dow Jones Industrial Average, but it’s superior in many ways, including being:
- Wider: The Nasdaq holds 100 stocks against the 30 holdings of the Dow Jones.
- More fully representative of the major market leaders. The Nasdaq 100 gives more weight to companies with the most commercial value in the market. This is undoubtedly a superior method to that of the Dow Jones. The Dow weights stocks based on their price per share. It doesn’t make logical sense, because Microsoft shouldn’t have twice as much influence as Apple just because it trades for around $275 per share and Apple only trades for $158. They are both worth around $2.5 trillion.
- More rule-based. The Nasdaq 100 relies less on human intervention. Changes are being made to both the Dow Jones and the Nasdaq 100 as stocks are added and removed. Humans choose what’s in the Dow and when changes are made. But because the Nasdaq 100 holds all the major Nasdaq stocks, there’s no judgment on what comes in and what goes out each year.
- A better performer: Perhaps more importantly, the Nasdaq 100 trumps the Dow in earnings. QQQ stock has returned 15.9% annually for the past 15 years, including dividends. The SPDR Dow Jones Industrial Average ETF (IAD) only returned 9.8% per year during this period. And over the past five years, the QQQ has returned 22.1% annually, outperforming the Dow Jones’ 12.8% return.
What is an ETF?
ETFs, created more than 25 years ago, are now among the fastest growing investment vehicles in the world. Like mutual fundsETFs are investments that have a bucket full of other investments.
And ETFs can own everything from individual stocks, like QQQ does, to bonds, commodities and currencies. Almost all ETFs hold the investments dictated by an index. QQQ stock holds shares of the Nasdaq-100.
But other ETFs own shares in other indices such as small stocks and mid-sized stocks. You can also buy ETFs that only hold growth stocks or beat stocks called value stocks. Some ETFs only buy shares held in specific sector indicessuch as information technology or public services.
And there are also more exotic ETFs. Some “Inverted ETFs“rise in value when the market falls. And some own commodities like gold or silver.
What are the main sectors of QQQ stock?
Technology and communications stocks dominate QQQ stock, accounting for more than two-thirds of the index. This strong sectoral concentration is a risk. The QQQ will suffer much more than the S&P 500 if tech stocks correct.
|Sector||Weight in stock QQQ|
|Industrial and public services||4.2%|
Source: Invesco as of May 6, 2022
What other options are there? How much do they cost?
Investors have a choice when considering buying the Nasdaq 100.
Investors can now hold the same shares on the Nasdaq 100 at one price much lower fees with a new ETF. This is the Invesco Nasdaq 100 ETF (QQQM). Like Invesco QQQ Trust, it owns the Nasdaq 100 largest non-financial companies. But it does so for 0.15% per year, 25% less than the 0.2% charged by the QQQ.
First Trust Nasdaq-100 Equal Weight Index Fund (QQEW) also owns the Nasdaq 100 non-financial stocks. But unlike QQQ stocks, QQEW holds all 100 stocks equally, rather than weighting them by value. The First Trust Nasdaq-100 Equal Weighted Index ETF is smaller than QQQ stock, with assets of $1.4 billion, and charges more (0.58%).
The equally weighted Direxion Nasdaq-100 index (QQQE), like QQEW, also holds equal weightings in all Nasdaq 100 stocks. It’s smaller, $438 million, but cheaper with an annual expense ratio of 0.35%.
Do QQQ shares pay dividends?
Few people buy tech stocks with the dividend targetbut one a growing number of these stocks are paying dividends. Apple and Microsoft are decent dividend payers now. But these dividends are a drop in the ocean as the majority of Nasdaq 100 stocks pay no dividends. Overall, QQQ stock’s dividend yield is just 0.5%, less than half the yield of the S&P 500.
QQQ Stock Technical Analysis – Is it a Buy It Now?
If you want to own leading Nasdaq companies, QQQ is hard to beat. The ETF has vigorous buying and selling during the day, keeping the price you would get for selling close to the price you would pay to buy.
On the other hand, some investors use QQQ stocks more tactically. They go in and out to catch market moves. If you are this type of investor, you will need to pay more attention to technical action in the broader market. These investors are looking for the QQQ to break above their 50-day moving average. And that’s 340 on May 6th. It’s 8% off now, so still worth watching but no time to buy. Currently, the QQQ is falling even further. And if so, that’s another reason to wait.
It is also important for QQQ to stay above its 21-day exponential moving average. A 10-day simple moving average (SMA) may be too tight and a Simple 50-day moving average too loose. IBD charts do not include the 21 day line. On Ranking graphs, the 21-day line is drawn in green. Subscribers to MarketSmith can configure custom moving averages.
The pulse of the IBD market will tell you if the market is in a confirmed uptrend and if now is a good entry point. And stock market today shows you the latest market trends that will tell you if you should be in QQQ in the short term or get out of it. And don’t miss this IBD webinar showing you how to trade QQQ like the pros.
QQQ stock is a great option for investors who want to make sure they don’t miss out on the next Amazon or Google. When the major Nasdaq stocks get big, they land on the QQQ. This is a simple way to hold a diversified basket of hot stocks.
Check out IBD stock lists and other IBD content for find dozens more of the best stocks to buy or watch.
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