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One of Wall Street’s favorite investment vehicles turns 25 on Sunday, but it shows no signs of fading into the background as the years pass. The Invesco QQQ Trust, which tracks the Nasdaq 100 Index and is often referred to under the ticker QQQ or simply “Qs,” has been an abbreviation for Growth Stock Investing since its inception on March 10, 1999. The fund is now the fifth-largest ETF in the U.S. with $250 billion in assets under management, according to FactSet, and has attracted about $7 billion in new inflows so far this year. We are well into our silver anniversary. The fund hit an all-time high on March 1 and closed within 2% of that level on Friday. It continues to rise after surging nearly 55% in 2023. One of the main talking points surrounding the 2023 rally for QQQ and the overall US market is the dominance of a handful of major stocks. However, historical data shows similar results to other significant years in which just four or five stocks accounted for roughly 20% or more of the index’s performance. However, please note one thing. Some of those big years happened right before big reversals. “We’ve found that each type looks and feels a little bit different,” said Ryan McCormack, a core equity strategist who represents exchange-traded funds at Invesco, about the best time for QQQ. “Typically, whenever you see a strong year like this, it’s driven by stocks that have heavier weights or heavier overweights relative to the index you’re trying to compare them to,” McCormack said. It will happen,” he added. . Change over time A look at past bull markets shows that the most important stocks often change from market cycle to market cycle. For example, Microsoft was the only company to contribute to the top 10 in both the 1999 and 2023 gatherings. In 1999, chip stocks Intel and Qualcomm dominated, but last year they were overshadowed by rivals Nvidia and Broadcom. As the Nasdaq 100 adjusts, the fund’s individual components also change over time. Just last year, the index added 10 new stocks and underwent its third special rebalancing, according to Nasdaq. Over the years, a number of major stocks have left the fund, including former top performers like acquired Nextel Communications and Sun Microsystems. And over the past 25 years, many of the fund’s leading companies have grown from relative upstarts to some of the most well-known and well-funded companies in the world. “Q is becoming more ingrained, not just in our portfolios, but in our lives. We’re not just using Apple devices, we’re using Amazon and Meta,” said Todd Thorne, ETF strategist at Strategas. said. Although QQQ is often associated with technology, it also includes giants from other industries, such as PepsiCo and Amgen. And some of the big tech stocks have changed so much over time that they now fall into the non-tech category, according to some classification systems. “Companies are very agile. Stock indexes look very different than they used to,” McCormack said. RELATED DRAMA His ETF industry competition for QQQ has expanded dramatically over the past quarter century, including other Invesco funds. The company offers several funds similar to QQQ, which may actually be a better option for some investors. For example, the Invesco Nasdaq 100 ETF (QQQM) has lower management fees than its predecessor and also has the ability to reinvest dividends, which can improve performance. “To put it simply, it should track the index more closely because it has a lower cash balance,” McCormack said. The fund was founded less than four years ago, but its total assets already exceed $20 billion.
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