In the past two decades, this notable ETF has yielded a staggering 1400% return. Uncovering the reasons behind its continued potential for even greater heights.
Ditch the notion that you need to be a stock-picking prodigy to earn decent returns in the stock market. Enter the world of exchange-traded funds (ETFs), which simplify the investment process and allow you to still reap substantial returns.
Some ETFs shine a spotlight on high-growth stocks, providing easy access to a multitude of thriving businesses. They execute regular rebalancing and reconstruction, so you don't have to constantly monitor which stocks possess the best buying potential and which ones might be growing too risky.
One of the top-performing ETFs that catches the eye of many investors is the Invesco QQQ Trust (QQQ -2.91%). It aligns with the Nasdaq 100 index, giving exposure to the top 100 non-financial stocks on the exchange.
This encompasses popular tech stocks and stellar performers from various industries. Although it has exceeded expectations year after year, this ETF still serves as an attractive place for long-term investments.
The magic of the Invesco fund isn't a secret; since 2005, its total returns (incorporating dividends) have surpassed 1,400%. A \$25,000 investment back then would be worth approximately \$380,000 today, outperforming an investment in a fund that mirrors the S&P 500 by a considerable margin.
Investing in the S&P 500 can be a smart move to diversify your stock portfolio. However, the benefit of the Invesco fund is its more focused portfolio of top growth stocks, capable of generating superior returns in the long run. Although there may be temporary volatility from one year to the next, growth stocks consistently outshine other investment types in the long haul.
Fears of inflated valuations in high-performing growth stocks may cross your mind, but don't be alarmed. The reason lies in the Invesco fund's connection to the Nasdaq 100, which undergoes regular reconstruction and rebalancing. Unlike a hot growth stock that may eventually lose steam, the Nasdaq 100's composition evolves over time, creating more opportunities for growth.
For instance, last month, the index removed stocks such as Illumina, Super Micro Computer, and Moderna and replaced them with Palantir Technologies, MicroStrategy, and Axon Enterprise. The index may experience high valuations, but by zeroing in on the top performers, funds that track the Nasdaq 100 can potentially outperform the market consistently in the long term.
Regular investments in the fund can be an excellent long-term strategy. Beverage your worries that valuations may be high today, as investing a fixed monthly amount can gradually increase your position. This means you don't have to stress about timing the market or missing the perfect opportunity.
By continuously investing, you even out the cost basis of your position. If the ETF drops in value, you're averaging down your position, a strategy that can lower the average price you paid for each share. If the ETF rises, you're not only benefiting from favorable market conditions but are also booking profits while buying in on the rally. Either way, investing consistently can form a robust long-term strategy and contribute to growing your portfolio at a potentially increased rate compared to merely following the S&P 500.
Investing in the Invesco QQQ Trust can be a great way to allocate some of your money in finance, as it provides access to high-growth stocks that are aligned with the Nasdaq 100 index. Regularly investing in this ETF can help you diversify your portfolio and potentially earn superior returns in the long run.
Managing your finance wisely and considering investing in ETFs like the Invesco QQQ Trust can be an intelligent way to build wealth over time, especially if you're interested in pursuing opportunities in the growing tech sector and other high-performing industries.