Although the tech sector has led the stock market over the past decade or so, it’s had a rough start this year. Through March 16, the S&P 500‘s tech sector is collectively down over 6%, and none of the “Magnificent Seven” stocks are up year to date.
Regardless of the sluggish start, plenty of tech stocks are still great long-term investments. If you’re looking to invest in tech stocks without taking on the risk that comes with individual stocks, a tech ETF is the way to go.
There’s no shortage of them, but a good go-to right now would be the Invesco Nasdaq 100 ETF (QQQM 1.41%). A $1,000 investment now could go a long way over time.
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Why investing in the Invesco Nasdaq 100 ETF is a smart move
QQQM mirrors the Nasdaq-100, so it’s not a pure-play tech ETF where every company is a tech company. However, tech stocks make up nearly 60% of the ETF, making it a good choice right now. You get exposure to many of the world’s best tech companies while also owning stocks in other sectors to help hedge against any tech-specific rough patches (like we’re going through now).
Nine of QQQM’s top 10 holdings are tech companies, with Walmart being the exception:
| Company | Percentage of the ETF |
|---|---|
| Nvidia | 8.82% |
| Apple | 7.49% |
| Microsoft | 5.92% |
| Amazon | 4.44% |
| Tesla | 3.91% |
| Meta Platforms | 3.71% |
| Alphabet (Class A) | 3.50% |
| Walmart | 3.35% |
| Alphabet (Class C) | 3.25% |
| Broadcom | 3.14% |
Data source: Invesco. Percentages as of March 12.
A good example of why a hedge from other sectors could be beneficial is looking at returns so far this year. QQQM is still down year to date, but it’s still outperforming the S&P 500’s tech sector and pure-play tech ETFs like the Vanguard Information Technology ETF.
A history of impressive returns
QQQM has only been around since October 2020 (it’s the newer — and cheaper — version of the more-popular Invesco QQQ ETF), but to see how lucrative the Nasdaq-100 has been, let’s take a look at the past 30 years. In that span, the index has averaged 13% annual returns, slightly below the 13.8% QQQM has averaged since its inception. If it were to continue with its 13% annual average, a one-time $1,000 investment could grow to over $11,500 in 20 years, over $21,200 in 25 years, and over $39,100 in 30 years.
Past performance doesn’t predict future performance, so it’s no guarantee it will continue. However, it’s being led by some of the world’s top tech companies, many of which have positioned themselves to be major players for quite some time.
Ideally, you’d continue buying shares of QQQM over time to fully take advantage of its growth opportunities as different tech industries continue to develop and expand.
Stefon Walters has positions in Apple, Microsoft, and Walmart. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, and Walmart and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.