The Nasdaq 100 Index the QQQs are based upon may boast 100 different constituents. Its top 10 holdings, however, account for more than half of the index’s value. Arguably worse, Invesco suggests that nearly half of the fund’s holdings are considered technology stocks. The next-nearest sector exposures are telecom and discretionary names, accounting for about 19% and 17% (respectively) of the index’s makeup. That’s not exactly a healthy balance either. All of these factors make the QQQs seem oddly erratic for an index-based fund.
But if you’re looking for high growth in an easy-to-own package, you may just want to accept that volatility as part of the QQQ ownership experience.
The obvious challenge is, you don’t know which of the Nasdaq’s biggest 100 companies are going to hit Apple- or Amazon-like home runs. Nvidia or Tesla might do it, or perhaps there’s a dark horse in the mix nobody expects big things from. That’s the whole point of owning a piece of all of them — or several of them — via a fund: You don’t have to know. You can simply plug into the best bits of this ilk, which somehow the Nasdaq exchange has done a better job of garnering than the New York Stock Exchange has.