ETF Building versatile portfolios with the QQQ Innovation Suite

Financial professionals rarely build portfolios around a single objective. They often balance long-term growth with near-term income needs, manage market volatility, and address challenges such as concentrated stock positions and domestic-market bias. Managing these competing priorities requires a range of investment tools that can work together within a portfolio.

The Invesco QQQ Innovation Suite is built around that reality. Its strategies can serve distinct portfolio roles, from core growth and international innovation exposure to income generation and downside risk management, providing multiple ways to pursue client objectives through Nasdaq-based approaches.

Starting with the core

Many financial professionals have looked to US large-cap equities as a driver of total portfolio returns. US markets have delivered substantial growth in recent years and include many of the world’s most innovative companies.¹ However, US large-cap funds can track different equity universes, resulting in distinct return profiles and portfolio characteristics.

The Nasdaq-100® Index provides exposure to the top approximately 100 largest nonfinancial companies listed on Nasdaq. These companies have a legacy of innovation supported by robust research and development (R&D) and have historically exhibited higher growth rates than industry peers.² Over the long term, that growth has contributed to strong index performance.

Two funds within the QQQ Innovation Suite provide pure Nasdaq-100 exposure.

• Invesco QQQ (QQQ), launched in 1999, is the suite’s largest fund, offering liquidity and featuring an established track record.³
• The Invesco NASDAQ 100 ETF (QQQM) provides the same index exposure at a lower expense ratio — 0.15% versus 0.18% — which may suit buy-and-hold investors.

Some financial professionals may use both based on portfolio role.

Addressing concentration risk in large-cap equities

A small group of large-cap companies has driven a meaningful share of the Nasdaq-100’s recent performance and index weight. Although investors have benefited from that strength, the resulting concentration can increase reliance on a limited number of stocks to drive returns. Financial professionals may therefore want to retain Nasdaq-100 exposure while reducing dependence on its largest constituents.

The Invesco QQQ Equal Weight ETF (QEW) offers one way to address this concentration risk. The fund holds the same companies as the Nasdaq-100 but tracks the Nasdaq-100 Equal Weighted™ Index, which assigns each constituent an initial 1% approximate weight. Each quarter, the index rebalances by trimming relative outperformers and adding to relative underperformers. This structure broadens participation across the Nasdaq-100 universe and reduces single-stock concentration relative to the market-cap-weighted index.

Identifying the next generation of innovators

Beyond large-cap equities, R&D-intensive mid-cap firms may offer access to an earlier stage of innovation and, over time, may grow into large-cap companies. Investing at this point in the market-cap spectrum can provide long-term growth potential as these firms commercialize innovative ideas.

The Invesco NASDAQ Next Gen 100 ETF (QQQJ) tracks the NASDAQ Next Generation 100 Index, comprising the next approximately 100 largest nonfinancial Nasdaq-listed companies outside the Nasdaq-100. It provides access to firms earlier in the market-cap spectrum than Nasdaq-100 constituents, some of which may eventually enter that index. Using QQQJ in combination with QQQ and QQQM gives investors exposure to the top large- and mid-cap Nasdaq-listed companies.

Going abroad for more innovation opportunities

US large- and mid-cap equities are important components of many portfolios. Innovation isn’t limited to US-listed companies, however. For those seeking greater geographic breadth, international markets may provide additional sources of return and diversification potential.

The Invesco Nasdaq International Innovators 100 ETF (QQI) offers exposure to innovative companies across international developed and emerging markets. It tracks the Nasdaq International Innovators 100 Index, which screens companies for R&D intensity, revenue and margin growth, and sustained profitability. Unlike international growth strategies that rely primarily on historical growth metrics, this approach seeks non-US companies whose commitment to innovation has produced attractive business results.

Pursuing income without giving up equity exposure

Financial professionals balancing growth and income may want to consider an approach that can pursue both objectives within a single allocation. The Invesco QQQ Income Advantage ETF (QQA) combines Nasdaq-100 equity exposure with an actively managed options-income strategy applied to roughly 50% of the portfolio. This structure is designed to preserve participation in the Nasdaq-100 while generating income potential.

QQA sources income opportunities by selling both call and put options.

• Covered calls produce premium income, but in exchange they cap upside on the covered portion of the portfolio.
• Cash-secured puts generate additional premium income and may provide a buffer against equity market declines.

To support a more consistent income stream, QQA uses a laddered implementation. Rather than establishing all option positions at once, the strategy adds and rolls portions of its options exposure on a regular schedule. This creates multiple entry points and reduces reliance on any single market outcome.⁴

How QQA's option income strategy works

Managing downside without a defined outcome period

For those seeking Nasdaq-100 upside participation while helping clients manage downside risk, the Invesco QQQ Hedged Advantage ETF (QQHG) holds the index’s underlying constituents and uses options-based hedges to help mitigate drawdowns. The fund substantially replicates Nasdaq-100 equity exposure and overlays one-year downside hedges established monthly. At the same time, it sells laddered one-month calls to help offset hedging costs in exchange for reduced upside participation.⁴ This approach may appeal to those who don’t want to add bonds to a portfolio to help offset equity volatility.

QQHG differs from defined-outcome and buffer funds in how it manages timing. Those products typically operate within fixed outcome periods, so an investor’s experience can depend on when their investment begins within the pre-defined period. Because QQHG has no fixed buffer period, financial professionals can seek downside risk management without selecting a predetermined outcome window or entry date.

Building versatile portfolios to pursue multiple objectives

The QQQ Innovation Suite spans large-cap growth through QQQ and QQQM, earlier-stage mid-cap growth through QQQJ, broader Nasdaq-100 participation through QEW, international innovation through QQI, income through QQA, and downside risk management through QQHG.

Matching portfolio objectives to the QQQ Innovation Suite

The common thread across these strategies is innovation. Some differ in how investors access the Nasdaq-100, while others broaden the opportunity set by market capitalization, geography, or investment objective. Together, they provide a flexible toolkit for aligning innovation exposure with each client’s growth, diversification, income, and risk-management priorities.

Explore the QQQ Innovation Suite.