Debunking three myths about QQQ

Even some of the world’s best-known companies face misconceptions about exactly what they do. Take Microsoft, for example—while many still associate it primarily with its Windows operating system, the company has significantly diversified. Today, it generates substantial revenue from its cloud computing platform, Azure, enterprise software solutions, and even gaming through its Xbox division. Similarly, Amazon might be thought of as just an online retailer, but its cloud computing arm, AWS, has become a major profit driver, helping cement Amazon’s critical role in the global tech infrastructure.

Invesco QQQ ETF, which tracks the Nasdaq-100 Index, is no different—it’s also subject to its own set of misconceptions. As one of the most innovative and widely traded ETFs, it’s critical to debunk these myths to provide investors with a clearer understanding of its composition and performance.

Myth #1: QQQ is just a tech fund

It’s true that QQQ has significant exposure to technology companies, but labeling it purely as a “tech fund” is misleading. As of December 31, 2024, approximately 40% of QQQ’s portfolio was allocated to non-tech sectors such as consumer discretionary, healthcare, industrials, telecommunications, and consumer staples. Notable holdings include Costco, Amgen, Honeywell, and PepsiCo. This diversification reflects the broader innovation occurring across industries beyond technology.

A look at some of QQQ’s non-tech sectors and associated top holdings

Myth #2: QQQ holds all Nasdaq-listed companies

Another common misconception related to QQQ is that it provides comprehensive exposure to the stocks listed on the Nasdaq Stock Exchange. In fact, QQQ tracks the Nasdaq-100 Index, a benchmark of the 100 largest non-financial companies listed on the Nasdaq. In other words, QQQ does not provide exposure to the Nasdaq Composite Index, which held 3,2973 securities* as of December 31, 2024, according to Nasdaq Global Indexes.

The ease of having access to the 100 largest non-financial Nasdaq-listed stocks may be appealing to some investors, while also providing exposure to some of the world’s best-known and innovative companies.

Large-cap Nasdaq-100 companies also tend to be highly traded, which contributes to QQQ’s liquidity. QQQ, as the second most traded ETF based on average daily volume traded within the U.S., has long been considered one of the most liquid ETFs available to investors as of December 31, 2024.¹

Myth #3: It’s easy to beat QQQ by picking stocks

QQQ has delivered solid long-term performance with a 15-year annualized net asset value (NAV) return of 18.50%.² It may be tempting for investors to think they could do better by simply picking the best stocks in the Nasdaq-100 Index. Sounds easy, right? Well, it turns out it’s not.

Standardized performance. Fund performance shown at NAV. Performance data quoted represents past performance, which is not a guarantee of future results; current performance may be higher or lower than performance quoted. Investment returns, and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. An investor cannot invest directly in an index. Index returns do not represent Fund returns. Invesco QQQ’s total expense ratio is 0.20%.

QQQ has a top 3% (10 of 748) ranking in Morningstar’s Large Growth category based on total return for the past 10 years as of December 31, 2024, which made it hard to beat over that period.

Source: Morningstar Inc. Morningstar rankings are based on total return, excluding sales charges and including fees and expenses versus all funds in the Morningstar category. Open-end mutual funds and exchange-traded funds are considered a single population for comparison purposes. Had fees not been waived and/or expenses reimbursed currently or in the past, the ranking would have been lower. The Morningstar one-year rank 68% (743 of 1088), three-year rank 21% (180 of 1020), five-year rank 5% (38 of 952), 10-year rank 3% (10 of 748) as of December 31, 2024.

Setting the record straight

Invesco QQQ offers investors a way to gain diversified exposure to some of the most innovative companies in the world. By dispelling these myths, investors can better understand how QQQ could fit into a broader investment strategy. Whether an investor is seeking long-term growth potential or sector-leading innovation, QQQ continues to stand out as an attractive option.

Key takeaways:

• Technology is Invesco QQQ’s largest sector, but the ETF also provides exposure to other areas of the economy such as healthcare and industrials.³
• QQQ tracks the Nasdaq-100 Index, a simple yet powerful approach that also helps boost the ETF’s liquidity.
• Over the past 10 years, QQQ has become one of the best performing large-cap growth funds.