How to Invest in Invesco QQQ ETF

Investors who want to make money through growth love the Invesco QQQ ETF Trust (QQQ 1.08%). The exchange-traded fund (ETF) that does not have a manager follows the tech-heavy Nasdaq-100 index. It has done better than the S&P 500 index over the past 10 years, with gains of about 400% compared to 175%. But the ETF comes with a lot of risks, and during bear markets, it tends to lose more money than the S&P 500 average.

This post will explain how to buy the Invesco QQQ ETF. You will find out about the fund’s biggest holdings, its history of dividends, its price ratio, and other things that will help you decide if the ETF fits your financial goals.

How do I get the Invesco QQQ ETF?

The Invesco QQQ ETF is a group of stocks that follow the trends of the 100 biggest non-financial stocks on the Nasdaq Stock Exchange. It has been around since 1999 and is the second most traded ETF in the U.S., after the SPDR S&P 500 ETF Trust (SPY 1.06%). With about $258 billion in assets under control, the QQQ is the fifth-biggest ETF in the U.S.

The Invesco QQQ ETF is market-cap weighted, just like its standard index. This means that the amount of each company that the fund holds is based on its market capitalisation. Tech stocks make up about 59% of the fund’s positions. Consumer discretionary stocks come in at 18%, and healthcare stocks come in at 6%.

The Invesco NASDAQ 100 ETF (QQQM 1.07%), which was launched by Invesco in 2020, also follows the Nasdaq-100 index. Because the QQQM has lower fees than the QQQ, small buyers may like it more. The QQQ, on the other hand, is much more liquid than the QQQM. This is why big investors and day traders who trade a lot still tend to prefer the QQQ.

How to get the Invesco QQQ ETF

The steps you take to invest in ETFs, like the Invesco QQQ ETF, are the same as those you would take to buy a single stock. Here are the steps to buy shares, whether you are a first-time trader or just want to review them.

Open a broking account. You will need to open a broking account before you can buy shares of the Invesco QQQ ETF. You could also open an individual retirement account (IRA) to lock in tax breaks if you plan to invest in ETFs for a long time. Giving your Social Security number and date of birth are two important pieces of information that you will need to open either account online. It will only take a few minutes. After that, you will need to add money to your account.

Work out your spending plan: Figure out how much you want to spend before you place your order. Before, you needed at least the price of one share to invest in an ETF. But now that many brokerages offer fractional buying, you can usually just give them a dollar amount and get the number of shares that go with it.

If you only want to invest $50 in an ETF that is trading at $400, for example, you could say that you want to spend $50 and get one-eighth of a share. You will also have to choose whether you want to spend a one-time amount or set up regular amounts to invest.

Get your work done: Make sure you know a lot about the Invesco QQQ ETF before you put your hard-earned money into it. Make sure you have read the investing prospectus for the fund and know what it holds and the risks that come with it. When you do your study, you should also look at the other investments you have and see how the ETF fits in. For instance, do you want to get more involved with growth stocks? Which of your other ETFs and stocks do you own that are similar to the Invesco QQQ ETF?

Put in an order: It is time to place an order if you are sure that the Invesco QQQ ETF will help you reach your goals. You will type in the stock’s name (QQQ), the number of shares you want to buy or their dollar value, and whether you want to place a market order or a limit order. Then, put in an order to buy Invesco QQQ ETF shares.

Should I put my money into the Invesco QQQ ETF?

The danger level of the Invesco QQQ ETF is pretty high, so not all investors should buy it. Before you buy the QQQ, here are some times when it makes sense and times when you should not.

You might want to buy the Invesco QQQ ETF if:

You can see a long way ahead: Put your money in the stock market as little as possible if you think you might need it in the next few years. But this is especially true for purchases like the Invesco QQQ ETF, which moves around more than the stock market as a whole. If you need money for an emergency, a down payment, or your child’s college next year, the QQQ is not the best pick.

It would not bother you if the investment lost money: In the past ten years, the QQQ has done better than the S&P 500, but it has lost more when the stock market goes down. If you look at 2022, the fund lost about one-third of its value, but the S&P 500 only lost about 18%. Do not buy the QQQ if you think you would sell your shares quickly if the price of the ETF dropped.

You want to learn more about technology: A lot of the stocks in the Invesco QQQ ETF are also in an S&P 500 index fund or a total stock market fund. If you already have money in one of those funds, the QQQ will not give you much extra diversity. But the QQQ might be a better choice if you want to invest more in the Nasdaq’s fast-growing companies, many of which are in the tech industry.

You might not want to buy the Invesco QQQ ETF if:

Your investments are not spread out enough yet: Before you buy QQQ ETF shares, you might want to invest in S&P 500 index funds if you are a new investor or if you only own a few stocks. The S&P 500 fund has a lot more different investments than the QQQ ETF. After the fact, you can add the QQQ if you decide you want more exposure to the growth stocks that make up most of the fund’s positions.

You do not like taking risks: This means that the Invesco QQQ ETF is about 18% riskier than the stock market as a whole. Stay away from this ETF if you do not like a lot of ups and downs.

You want to make money from investments: At the time this was written, the QQQ had a very low yearly dividend yield of 0.6%. Growth stocks do not usually pay big returns because the company puts the money back into the business. A dividend ETF or a value stock ETF is a better choice if you want to get money from your investments.

What the Invesco QQQ ETF owns

The 100 biggest non-financial stocks that trade on the Nasdaq Exchange make up the Invesco QQQ ETF. Even though it is not a sector ETF that only holds tech stocks, most of its holdings are in that area. Costco is the only non-tech company in its top 10 stocks. On May 3, 2024, these were the things that the ETF held the most of:

• 8.62% for Microsoft (MSFT 0.3%)
• 8.08% for Apple (AAPL 1.03%) and 6.33% for Nvidia (NVDA 4.55%).
• It is 5.52% for Amazon (AMZN 0.52%).
• Meta Platforms Class A (META -0.74%): 4.51%
• 4.37% for Broadcom (AVGO 2.48%)
• Capital Letter A (GOOGL 1.11%): 2.81%
• Capital Letter C (GOOG 1.17%): 2.71
• Tesla (TSLA 4.59%): 2.49%
• Value of Costco (COST 0.19%): 2.43%

The Invest QQQ ETF’s 10 biggest stocks make up about 48% of its market capitalisation weight as a whole. Keep in mind that all 10 of these stocks are already part of the S&P 500 index.

For those who already have an S&P 500 index fund or a mutual fund or ETF that tracks most of the U.S. stock market, the Invesco QQQ ETF will not add much to their portfolio. Instead, it will give you more access to many of the same core stocks.

How much does the Invesco QQQ ETF cost?

The amount of your cash that goes towards fees when you buy an ETF is called its expense ratio. With an expense ratio of 0.2%, the Invesco QQQ ETF would cost you $20 out of every $10,000 you spend. The other $9,980 would be put into the fund.

Cost-to-return rates are important to know because small fees can cut into the returns on your investments over time.

If so, does the Invesco QQQ ETF give a return?

The Invesco QQQ ETF gives a dividend every three months that is based on the dividends that the companies in the fund give to their owners. The payout yield per year was 0.60% in May 2024. On the other hand, the dividend return for the S&P 500 index was about 1.4% during the same period.

It is not a surprise that the Invesco QQQ ETF has a low dividend return. Growth stocks do not usually give out big dividends because the companies use their profits to grow instead of giving back to shareholders. A dividend ETF is a better choice than the Invesco QQQ Trust if you want to get money from your investments.

How the Invesco QQQ ETF has done in the past

It is been ten years since the Invesco QQQ ETF gave me $10,000. Now I have more than $50,000. Long-term, the QQQ has given better returns than the S&P 500. However, past performance does not guarantee future success.

This index does worse than the S&P 500 when the stock market is down, which is not a surprise. That is because buyers tend to put their money into value stocks rather than growth stocks, which are many of the stocks in the QQQ.

The Invesco QQQ ETF’s main point

If you are willing to take on a fair amount of risk, the Invesco QQQ ETF is worth looking into. Because it is mostly invested in tech, though, it is not a good replacement for an S&P 500 ETF or a total stock market index fund, which offers a lot more variety. You should only buy ETF shares if you want to get more exposure to high-growth tech stocks and already have a well-balanced portfolio of investments.

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