Investing Basics

How QQQ can fit into your portfolio

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Talking Points
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Large-Cap Growth can be an important aspect of a diversified portfolio.

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Since 2011, Invesco QQQ’s underlying index, the Nasdaq-100 has generated higher growth rates of key fundamental metrics than competing indexes.

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The top names in QQQ have also become some of the top names in the S&P 500, representing the some of the most successful companies in the world.

Large-Cap stocks tend to be the largest portion of many portfolios and have played an important role in providing potential growth to a portfolio comprised of stocks, bonds, and alternatives. What we have seen over the previous 20 years is that Large-Cap companies have been a primary driver of a portfolio’s returns. The S&P 500 Index, which is representative of Large-Cap companies, has outperformed the Small-Cap stocks, International stocks, and Investment Grade Bonds.  Specifically in Large-Cap, Large-Cap Growth stocks have shown strong performance during this period and have outperformed the broader Large-Cap group. 1

Invesco QQQ ETF (QQQ) assets represent 28% of all assets in US Large-Cap Growth ETFs.2 There are many reasons investors may have chosen QQQ to represent their Large-Cap and Large-Cap Growth exposure. The companies within the Nasdaq-100 Index, Invesco QQQ’s underlying index, have shown higher levels of historic growth rates of fundamental metrics such as revenue, earnings, and dividends when compared to the S&P 500 and Russell 1000 Growth.

See standardized performance. Performance quoted is past performance and cannot guarantee of comparable future results; current performance may be higher or lower. Visit invesco.com/performance for the most recent month-end performance. Investment returns and principal value will vary; you may have a gain or loss when you sell shares. Market returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower.

Source: Bloomberg L.P., 12/31/11 – 12/31/21. Performance Data Quoted represents past performance and does not guarantee future results. An investment cannot be made into an index. Index returns do not represent fund returns.

We believe the higher growth rates of these fundamental metrics has fueled Invesco QQQ’s outperformance against industry benchmarks such as the S&P 500 and Russell 1000 Growth indexes.3 

We have seen some of the leaders in the Nasdaq-100 grow into the leaders in the overall market. While companies like Apple, Meta Platforms (formerly Facebook), Amazon and Google have had a large presence in QQQ, they have also become some of the largest companies in the S&P 500. Through recent years, the S&P 500 has started to look more like QQQ as we now see overlapping holdings’ aggregate market capitalization comprise 47% of the S&P 500’s market cap.4 Only 10 years ago, this number was at 20% and illustrates the influence QQQ holdings may have had on the broader market. Some of the companies that are in both QQQ and the S&P 500 have risen to the top of their industries and have become some of the most successful and well-recognized companies in the world.5

Large-Cap Growth can be an important part of a diversified portfolio. QQQ has continued to be one of the leaders in this category and has given investors access to innovative companies that have grown revenue, earnings and dividends at a faster rate than the broader market (S&P 500). For investors looking for exposure within the large-cap growth segment of the market, Invesco QQQ should be considered.

Footnotes

  • [1] Source: Bloomberg L.P. as of 3/31/2022. Benchmarks and returns for Large-Cap, Large-Cap Growth, Small-Cap, International, and Investment Grade bonds are as follows: Large-Cap – S&P 500 Index, 9.24%; Large-Cap Growth: Russell 1000 Growth, 10.47%; Small-Cap: Russell 2000 Index, 8.71%; International: MSCI EAFE Index, 5.95%; Investment Grade Bonds: Bloomberg US Aggregate Bond Index, 4.00%.

     

    [2] Source: Bloomberg L.P., as of 3/31/2022. AUM of QQQ $198 billion.


    [3] Source: Bloomberg L.P., as of 3/31/2022. For the past ten years, the Invesco QQQ ETF based on NAV return (19.40%) has outperformed the S&P 500 (14.62%) and Russell 1000 Growth Index (17.03%).

     

    [4] Source: Nasdaq, Bloomberg L.P. as of 12/31/2021.


    [5] Source: Bloomberg, L.P., as of 3/31/2022. Holdings are subject to change and are not buy/sell recommendations.

How to invest in QQQ

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