Looking for a high-growth stock with huge potential — especially as tech stocks get hammered? Apple or Microsoft stock? Amazon.com or Facebook? Why choose? Own it all.
QQQ Stock, or the Invesco QQQ Trust (QQQ), puts the 100 most important Nasdaq stocks into your portfolio in one trade. Best of all, it leaves out the financials, focusing your portfolio on companies in the fastest growing sectors. QQQ is a low-cost way to own the companies that are building the future economy.
And instead of trying to pick the right tech stock to buy and when to buy it, make a trade and own it all right now.
All this with a minimum fee of just 0.2% per year. After a commission war that started in 2019 from Charles Schwab (SCHW), Interactive brokers (IBKR) and TD Ameritrade (AMTD), you can buy this fund commission-free. That means you pay just $20 a year for every $10,000 you invest.
How do you board?
What is QQQ stock?
QQQ stock is the fifth most popular exchange-traded fund in the world, with more than $160 billion in investor assets. It tracks the Nasdaq-100 index, which holds the most valuable non-financial stocks on the Nasdaq. QQQ is also the largest ETF that tracks a smaller portion of the stock market. The largest ETF is the broad stock SPY, which holds all stocks in the S&P 500.
But while QQQ stock is not a broad market ETF, it does hold the most valuable stocks traded on the Nasdaq. This definition means that QQQ is very tech heavy. Most of the world’s biggest tech stocks still trade on the Nasdaq. And since technology continues to be the top performing sector, like the giants Microsoft (MSFT) and apple (AAPL) plus technology-adjacent Amazon.com (AMZN) only become more important in the ETF.
What are the top 10 QQQ stock holdings?
QQQ stock is heavily skewed towards megacap tech stocks. All of its top 10 holdings are tech or tech companies like Amazon.com.
|Company||Symbol||Weight in QQQ stocks|
Source: Invesco as of 18 November 2022
Why is the Nasdaq 100 better than the Dow Jones?
The Nasdaq 100 is not as famous as the Dow Jones Industrial Average, but it is superior in many ways, including because it is:
- Wider: The Nasdaq holds 100 stocks to the Dow Jones’ 30 stocks.
- More fully representative of the major market leaders. The Nasdaq 100 gives more weight to companies with the most market value transactions. This is arguably a superior method to Dow’s. The Dow weights stocks based on their share prices. This makes no logical sense.
- More rules based. The Nasdaq 100 relies less on human intervention. Changes are taking place in both the Dow and the Nasdaq 100 as stocks move in and out. People choose what’s in the Dow and when changes are made. But since the Nasdaq 100 holds all of the major Nasdaq stocks, there’s no judgment about what goes in and out each year.
- Best Performer: Perhaps most importantly, the Nasdaq 100 is ousting the Dow in terms of gains. QQQ stock has returned 13.2% annually over the past 15 years, which includes dividends. The SPDR Dow Jones Industrial Average ETF ( DIA ) returned just 9.0% annually during that period. And over the past five years, the QQQ has returned 13.9% annually, beating the Dow’s 9.7% return.
What is an ETF?
Created more than 25 years ago, ETFs are now among the fastest growing investment vehicles in the world. Like mutual funds, ETFs are investments that hold a bunch of other investments.
And ETFs can hold everything from individual stocks, like QQQ, to bonds, commodities and currencies. Almost all ETFs hold investments dictated by an index. QQQ stock holds the stocks of the Nasdaq-100.
But other ETFs hold shares in other indexes, such as small-caps and mid-caps. You can also buy ETFs that only hold growth stocks or stocks called value stocks. Some ETFs buy only stocks held in specific industry indexes, such as information technology or utilities.
And there are also more exotic ETFs. Some “inverse ETFs” rise in value when the market falls. And some of their own commodities like gold or silver.
What are the top sectors in QQQ stock?
Technology and communications stocks dominate the QQQ stock, accounting for more than two-thirds of the index. This heavy industry concentration is a risk. The QQQ will suffer much more than the S&P 500 if tech stocks correct.
|Sector||Weight in QQQ stocks|
|Basic consumer goods||7.0%|
|Industrial and utilities||5.2%|
Source: Invesco as of 18 November 2022
What other options are there? How much do they cost?
Investors have a choice when considering the Nasdaq 100 market.
Investors can now own all the same stocks in the Nasdaq 100 for a much lower fee with a new ETF. It’s the Invesco Nasdaq 100 ETF (QQQM). Like Invesco QQQ Trust, it owns all 100 largest non-financial companies on the Nasdaq. But it does so for 0.15% a year, or 25% less than the 0.2% QQQ charges.
The First Trust Nasdaq-100 Equal Weighted Index Fund (QQEW) holds all 100 non-financial stocks on the Nasdaq. But unlike QQQ stock, QQEW holds all 100 stocks equally, rather than weighting them by value. The First Trust Nasdaq-100 Equal Weighted Index ETF is smaller than the QQQ stock, with $1.4 billion in assets and charges more (0.58%).
The Direxion Nasdaq-100 Equal-Weight Index (QQQE), like QQEW, has equal weightings to all stocks in the Nasdaq 100. It’s smaller at $438 million, but cheaper with an annual expense ratio of 0.35%.
Does QQQ stock pay dividends?
Few people buy tech stocks with an eye on dividends, but a growing number of these stocks pay dividends. Apple and Microsoft are now decent dividend payers. But those dividends are a drop in the bucket as the majority of Nasdaq 100 stocks don’t pay a dividend. Overall, QQQ stock’s dividend yield is just 0.7%, or less than half the S&P 500’s yield.
QQQ Stock Technical Analysis — Is It a Buy Now?
If you want top Nasdaq companies, it’s hard to beat QQQ. The ETF has heavy buying and selling throughout the day, keeping the price you would get to sell close to the price you pay to buy.
On the other hand, some investors use QQQ shares more regularly. They fly in and out to catch market movements. If you are this type of investor, you should pay more attention to technical action in the broad market. These traders are looking for the QQQ to break above the 50-day moving average. And that’s 277 on November 18th. It’s 3% higher now, so it’s time to think about buying.
It is also important for QQQ to remain above the 21-day exponential moving average. A 10-day simple moving average (SMA) can be too tight and a 50-day simple moving average too loose. IBD charts do not include the 21 day line. On the Leaderboard charts, the 21-day line is drawn in green. Subscribers to MarketSmith can set custom moving averages.
IBD’s Market Pulse 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 breaking market trends that will tell you whether you should be QQQ short-term or out. And don’t miss this IBD webinar that shows you how to trade QQQ like the pros.
QQQ stock is a great choice for investors who want to make sure they don’t miss out on the next Amazon or Google. When the top Nasdaq stocks go big, they land on the QQQ. This is a simple way to get a diversified basket of hot stocks.
Check out our IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
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