How ETFs — including Invesco QQQ — have democratized investing

Key takeaways:

• Exchange-traded funds (ETFs) have helped level the playing field for individual investors by giving them institutional-caliber investment tools.
• ETFs have evolved from tradeable equity index funds to cover a range of asset classes, niches, and active strategies.
• QQQ was one of the original ETFs and has provided exposure to some of the world’s most innovative companies for nearly 25 years.

ETFs burst onto the scene 30 years ago and the investing landscape hasn’t been the same since. At a fundamental level, ETFs transformed the market by leveling the playing field. With ETFs, individual investors can gain access to global markets at fees once reserved for only the largest institutional investors.

Today, ETF investors trade billions of shares on global exchanges every day across a broad range of asset classes. As one of the earliest and largest ETFs, Invesco QQQ has played a crucial role in shaping the overall ETF market for multiple generations of investors.

ETFs: From 30 to 3,000 in under three decades

The first US ETF was launched in 1993 and QQQ followed a few years later in 1999 to quickly become one of the largest and most highly traded ETFs. Assets in QQQ — which tracks the Nasdaq-100 Index and features Apple, Amazon, Microsoft and other industry leaders — have grown to more than $190 billion.¹

When QQQ first launched in 1999, there were only 30 ETFs listed in the US, with total assets across all ETFs amounting to about $34 billion.² Fast forward to today and there are nearly 3,000 US-listed ETFs, with $6.8 trillion of assets.³ ETFs have been around in the US for three decades, and their assets have doubled over every rolling five-year period during that timeframe.⁴ Clearly, investors are voting with their dollars.

The seed of that remarkable growth was a simple yet powerful idea: What if a new type of security could be created that combined elements of individual stocks and index funds? The result was exchange-traded portfolios based on popular benchmarks such as the S&P 500 and Nasdaq-100 Index.

Investors and financial professionals like ETFs for their:

• Lower costs: ETFs often have cheaper expense ratios than comparable mutual funds due to potentially lower administrative costs.⁵
• Tax efficiency: The process of ETF creation and redemption may help limit capital gains distributions and taxable events.
• Liquidity and flexibility: ETFs can be bought and sold during the trading day.
• Transparency: Most ETFs disclose their full holdings daily.

Today, investors can use ETFs to invest in a variety of asset classes, including stocks, bonds, commodities, currencies and alternatives. They can choose from actively managed strategies, as well as specialized ETFs in areas such as cybersecurity and the blockchain ecosystem (the code on which cryptocurrencies are built). In other words, ETFs have helped democratize investing because they’ve put institutional-caliber tools in the hands of all investors.

QQQ: You’ve come a long way

QQQ has helped investors by striving to provide  low-cost, liquid, tax-efficient and transparent exposure to companies that are at the forefront of transformative, long-term themes.⁶ Since its inception in 1999, QQQ’s Net Asset Value (NAV) has delivered an annualized return of 7.86% outperforming the broad US market, as measured by the S&P 500 Index, which posted an annualized return of 6.68% from the beginning of 1999 through the end of 2022.⁷

Standardized Performance. Performance data quoted represents past performance, which is not a guarantee of future results. An investor cannot invest directly in an index. Index returns do not represent Fund returns.

The Nasdaq-100, which QQQ tracks, has seen individual stocks come and go, but one thing that’s remained constant for investors is the ability to gain exposure to some of the world’s most innovative companies in one fund. Some of the largest names in QQQ weren’t even around when the ETF launched in 1999, including Tesla and Facebook (Meta Platforms).

It’s also interesting to look at how some of QQQ’s largest companies have evolved and innovated over the years.

The best may be yet to come

Although ETFs have been around for 30 years, they could still be in the relatively early innings as more investors and financial professionals discover their benefits and flexibility. We believe QQQ will be a key engine of that growth as the economy and technology continue to evolve and investors look for ways to incorporate innovation into their portfolios.