Designed to provide broad exposure to the Large Cap Growth segment of the US equity market, the Invesco QQQ (QQQ) is a passively managed exchange traded fund launched on 03/10/1999.
The fund is sponsored by Invesco. It has amassed assets over $157.66 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.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
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 0.65%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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 55.30% of the portfolio. Consumer Discretionary and Telecom round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 12.39% of total assets, followed by Microsoft Corp (MSFT) and Amazon.com Inc (AMZN).
The top 10 holdings account for about 51.98% 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 -27.73% so far this year and is down about -23.03% in the last one year (as of 09/19/2022). In the past 52-week period, it has traded between $271.39 and $403.99.
The ETF has a beta of 1.11 and standard deviation of 28.27% 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.
Invesco QQQ carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, QQQ is a good option for those seeking exposure to the Style Box - Large Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 1000 Growth ETF (IWF) and the Vanguard Growth ETF (VUG) track a similar index. While iShares Russell 1000 Growth ETF has $59.30 billion in assets, Vanguard Growth ETF has $71.08 billion. IWF has an expense ratio of 0.18% and VUG charges 0.04%.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.