Considering an Investment in the Nasdaq? Explore This ETF as a Prime Choice for the Upcoming Year

When individuals talk about investing in the Nasdaq, they might be referring to different things.

For many, this involves putting money into the Nasdaq Composite, which is one of the major indexes in the U.S. stock market. This index includes nearly all stocks listed on the Nasdaq (NDAQ) stock exchange. Others might focus on the Nasdaq-100, a specific group that includes the 100 largest non-financial companies within the Nasdaq Composite.

Neither choice stands out as superior; it largely depends on personal investment preferences. The Nasdaq Composite boasts greater size and diversity with over 2,500 companies, while the Nasdaq-100 is more focused on the top-performing stocks.

As we approach the new year, a solid investment avenue to consider is a Nasdaq-100 exchange-traded fund (ETF) like the Invesco QQQ Trust (QQQ). This ETF has gained a reputation as one of the most favored options on the market and has shown strong returns over the years.

Growth Potential in the Top Holdings of the ETF

This ETF operates on a market-cap weighted basis, meaning larger companies hold more weight in the fund. As a result, several leading tech giants play a crucial role in the ETF's success. Below are the top 10 holdings:

Company	Percentage of the ETF
Apple	8.96%
Nvidia	7.88%
Microsoft	7.83%
Amazon	5.62%
Meta Platforms	5.12%
Broadcom	4.89%
Tesla	4.61%
Costco Wholesale	2.70%
Alphabet (Class A)	2.58%
Alphabet (Class C)	2.48%

As of December 10, these ten companies account for over 52% of the ETF, indicating a lack of complete diversification. However, many of these companies possess robust growth potential as we move into 2025 and beyond. This growth is driven by emerging trends such as artificial intelligence (AI), cloud computing, and electric vehicles (EV).

While AI is not a dedicated industry, it is anticipated to transform various sectors significantly. Companies like the ones listed above are at the forefront, supplying the necessary hardware and software required for AI advancement.

In the realm of cloud computing, leading companies like Amazon, Microsoft, and Alphabet dominate the market, holding market shares of 31%, 20%, and 11%, respectively. The ongoing growth in this area indicates significant potential for future earnings.

The global EV market has experienced rapid development, valued at around $500 billion in 2023 and projected to nearly reach $1.9 trillion by 2032, representing a compound annual growth rate of approximately 14%. Although only Tesla is featured in the top 10 holdings, the company is deeply integrated with various suppliers and partners for its technology.

Proven Performance of the ETF Over Time

Since its launch in March 1999, the Invesco QQQ Trust has enjoyed substantial growth, showcasing over 930% returns by December 12, 2023, with an average annual return of around 9.5% that surpasses the S&P 500. For example, a $1,000 investment at inception would have grown to over $10,300.

While past performance is not an absolute indicator of future results, the ETF has demonstrated resilience through various challenging market phases, including the dot-com bubble, the Great Recession, and the COVID-19 pandemic.

Investors will also appreciate the favorable expense ratio of this ETF, which stands at 0.2%. This means an annual cost of $2 for every $1,000 invested, which is reasonable compared to some S&P 500 ETFs. While the expense ratio might not seem vital initially, minor differences can accumulate into significant amounts over time. The Invesco QQQ Trust presents itself as an affordable option with a record of strong performance and substantial growth prospects for its major holdings.

Nasdaq, Investing, ETF