One great feature of exchange traded funds (ETFs) is their ability to offer quick exposure to a particular market sector. A prime example is the Invesco QQQ ETF (NASDAQ:QQQ). QQQ stock allows traders and investors to easily allocate into a basket of stocks focused on technology.
Here’s a scenario to consider. Let’s say you’d like to bet on a recovery in the embattled semiconductor market. One approach would be to try to pick out individual stocks in this niche.
However, not everyone is comfortable being a stock picker. QQQ stock isn’t entirely focused on semiconductor companies, but those companies are certainly represented in the fund.
As we’ll see, both short-term traders and long-term investors can use this ETF effectively. It’s a fund that’s both diverse and versatile, appropriate for many different account types and strategies.
A Closer Look at QQQ Stock
One aspect of QQQ stock that makes it ideal for short-term and long-term buying and selling is its high trading volume.
Impressively, more than 50 million shares of the ETF traded hands on May 21, 2021. And, that’s not very far from the average.
Long-term investors might be interested in QQQ stock’s annual distribution rate (dividend yield plus interest payments) of 0.48%.
Granted, you probably won’t get rich overnight from that distribution rate. Still, it’s a nice little bonus for buy-and-hold investors.
Now, let’s look at the share price’s progress. QQQ stock definitely has momentum, as it has advanced from $230 to around $330 in the past year.
Does this mean that the fund is expensive? It depends on your point of view. Today’s midday price of $333.92 is pricey for folks with smaller trading accounts, admittedly.
On the other hand, from a valuation perspective, an argument could be made that QQQ stock isn’t overpriced. The fund’s manager, Invesco, identified its price-to-earnings ratio as 32.65.
That’s not super-low, by any means, but it’s also not sky-high. Therefore, it’s entirely possible that technology stocks aren’t as expensive as some folks might think they are.
Exposure to Tech Titans
So, what’s inside of the fund? If you peek at the holdings, you’ll see some very familiar tech names.
These are technology titans that have experienced tremendous growth over the past decade.
And if you thought that QQQ stock at $300+ is pricey, it’s quite affordable compared to $3,000+ Amazon stock.
Just be aware that the fund is somewhat Apple-heavy. Specifically, the ETF has a nearly 11% weighting in Apple stock.
It also has a weighting in Amazon stock that’s slightly above 8%. So, you’ll definitely want to be bullish on these companies if you’re going to hold QQQ stock.
Track the ‘Daq
I should also mention that the fund has a total expense ratio of just 0.2%.
In other words, Invesco is charging a small fraction of a percentage point each year to manage the fund. I’d say it’s a pretty good deal for the investors.
So, instead of keeping track of 100 different technology companies, you can just relax and do other things with your spare time.
That being said, it’s still important to “know what you own,” as the old saying goes.
Thus, as a trader or investor of QQQ stock, you’ll want to closely follow the index which it’s based on: the Nasdaq 100.
You’ll be glad to know that the Invesco QQQ ETF does a good job of tracking the Nasdaq 100 index.
They won’t necessarily move identically on any given trading day, but over time, they should be strongly correlated.
This is all just to say that the fund does its job, and does it well. What more could you ask for, really?
QQQ Stock: The Bottom Line
At first glance, QQQ stock might seem expensive. Yet, a closer inspection reveals that it’s actually fairly priced.
And so, Invesco brings us a fund with exposure to giants in the technology field — and you can participate quickly and conveniently, without breaking the bank.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.