Exploring the Invesco NASDAQ 100 ETF (QQQM) for Your Investment Portfolio

The Invesco NASDAQ 100 ETF QQQM commenced operations on October 13, 2020, offering investors an avenue to the Large Cap Growth sector of the US equity market. Managed by Invesco Ltd. IVZ, an esteemed investment management firm based in Atlanta, Georgia, QQQM has accumulated over $15.33 billion in assets, characterizing it as one of the preeminent ETFs aligned with the segment.

Large Cap Growth Focus

Targeting entities with market capitalizations exceeding $10 billion, large cap stocks are considered to be more consistent and less volatile compared to their smaller counterparts. Growth stocks within this bracket generally exhibit faster growth rates, bear higher valuations, and maintain growth rates above the market average. However, they carry an intrinsic risk level that is higher than other equity classes. Despite this, growth stocks have an inclination to surpass value stocks in robust bull markets, whereas value stocks tend to perform better across a variety of market conditions.

Fees and Expenses

Investors must consider the expense ratio of an ETF, as products with lower costs generally deliver superior results if all other factors are constant. QQQM boasts a competitive annual operating expense ratio of 0.15%, positioning it as one of the most economical options within its sector. The ETF also offers a dividend yield of 0.63% over a 12-month period.

Sector Allocation and Leading Assets

The ETF prioritizes the Information Technology sector, amounting to roughly 50% of the portfolio, followed by allocations in Telecom and Consumer Discretionary. At the forefront of its holdings are Apple Inc. AAPL and Microsoft Corp. MSFT, two titans within the tech sphere, renowned for their innovations in consumer electronics and software, respectively. Together, they represent a significant proportion of the ETF's assets, with the top ten holdings comprising around 49.11%.

Performance Metrics

QQQM endeavors to replicate the performance of the NASDAQ-100 INDEX, encompassing 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq. With a 42.75% increase since the year's start and a 34.74% rise over the preceding year (as of November 13, 2023), the ETF has portrayed a notable performance. The fund's beta of 1.16 and a standard deviation of 23.58% for the trailing three-year period indicates a moderate level of risk and volatility. Holding close to 103 stocks, QQQM diversifies away from company-specific risks.

Alternative Investment Options

While QQQM holds a Zacks ETF Rank of 2 (Buy), considering future asset class returns, expense ratio, and momentum, investors seeking similar market exposure might also evaluate other ETFs like the Vanguard Growth ETF VUG and the Invesco QQQ QQQ. VUG and QQQ track closely related indices but differ in asset sizes and management expenses.

The Verdict

Passive ETFs, esteemed for their affordability, transparency, adaptability, and tax efficiencies, are experiencing mounting popularity among both institutional and retail investors. They serve as excellent tools for investors with a long-term perspective. For those looking to diversify their portfolio with Large Cap Growth stocks, QQQM could be a strategic inclusion on their investment radar.

Investing, ETF, Growth