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QQQ ETF Risks and Rewards

The QQQ ETF is an exchange-traded fund launched by Invesco on 3rd October 1999, whose underlying index is Nasdaq 100. QQQ ETF's performance depends upon the Nasdaq 100 index's performance, which consists of top US-based companies across various sectors.

It is a highly diversified and positively volatile ETF (exchange-traded fund) that is continuously running bullish. It includes companies like Apple, Tesla, Amazon, Google, and other big companies traded on Nasdaq.

What is the QQQ ETF?

QQQ ETF is the type of ETF constructed with the top 100 US-based companies based on their market capitalization. It is the fourth most popular ETF in the world. In the QQQ ETF, the companies have been assigned weightage according to their market capitalization, in which the tech-savvy conglomerates constitute the highest weightage. The daily average trade volume of this ETF is around $14.3 billion.

This Invesco QQQ ETF was referred to as PowerShares QQQ Trust ETF. It also indicates the country's performance and trading in the technology sector.

QQQ ETF Risks and Rewards

The most attractive part of the Invesco QQQ ETF is that it is a marketable instrument that can be traded on the exchange and provide the medium for retail investors to collectively invest their amount as underlying the top companies on the Nasdaq.

Holdings of QQQ ETF in Different Sectors

The QQQ ETF is regarded as the tech concentrated ETF because around half of its holdings are in tech companies, due to obvious reasons as this is the era of technology. The technology sector has a share of about 50.53%, including companies like Apple, with the highest weightage of 13.36%. Other tech companies on the list are Microsoft, NVIDIA, Cisco, Adobe, Qualcomm, Intel, etc.

Next comes the communication services sector, which has a share of 15.15% in the ETF; this sector also constitutes various giant companies like Alphabet Inc Class C and Alphabet Inc Class A (the parent company of Google), Meta, Comcast, Netflix, Sirius XM Holdings Inc, etc. In this sector, Alphabet Inc Class C and A have the highest weightage with 3.32% and 3.22%, respectively.

The last sector in the QQQ ETF that has a weightage in the ETF in double digits is the Consumer Discretionary sector which has a weightage of about 14.56%. It includes the most famous companies in the world, like Amazon, Tesla, Starbucks, Marriot International, Airbnb Inc, eBay Inc, etc. Among these, the largest weightage or holding in the list is with Inc, which is about 5.63%. Then comes Tesla Inc, with a weightage share of 3.33%.

QQQ ETF Risks and Rewards

Apart from the above-stated sectors, there are also various sectors included in the ETF like Health Care, Consumer Staples, Industrials, Utilities, and the last one is not classified sector; their holding weightage is 7.6%, 6.9%, 3.86%, 1.4%, and 0.15%, respectively.

Company-wise Top 10 Holdings of the Invesco QQQ ETF

The company-wise top 10 holding of the QQQ ETF includes companies of multiple disciplines like mobile and internet, IoTs, Cloud computing, Software, Electric Vehicles, Streaming services, online Payment services, etc. The list of the top 10 companies is given below:

Serial No. Companies Allocation (%)
1) Apple Inc 13.36%
2) Microsoft Corp 10.10%
3) Inc 5.63%
4) Tesla Inc 3.33%
5) Alphabet Inc Class C 3.32%
6) Alphabet Inc Class A 3.22%
7) NVIDIA Corp 3.20%
8) PepsiCo Inc 2.27%
9) Meta Platforms Inc Class A 2.19%
10) Costco Wholesale Corp 2.10%

Pros and Cons of QQQ ETF

Pros of QQQ ETF

The QQQ ETF is regarded as one of the most famous ETFs available in the world due to its various benefits like growth, value appreciation of investments, economics, etc. Some of its notable pros are discussed below:

Highly Bullish

The underlying index of QQQ ETF is the collection of business giants in their respective fields. They are the front runners in their sector, and the market capitalization of most of them is increasing daily. This factor moves the index positively and high, and due to that, the QQQ ETF also shows highly bullish trends. QQQ ETF is the right choice for investors interested in investments with high bullish movements.

Scope for Long-Term Growth

The QQQ ETF holdings include companies from diversified sectors like technology, electric vehicle, IoT, AI, mobile and computers, consumer utilities, etc. This diversified holding makes the ETF safer because of its vast diversification. This ETF ushers the way for long-term growth because the companies in its portfolio are future-generation companies with a high probability of growth. Thus, this ETF is very profitable with a high long-term growth prospective due to diversification across different sectors and themes and maximum holdings in tech future generation companies.


The QQQ ETF is the second most liquid ETF after the SPY ETF. The Invesco QQQ ETF offers high liquidity with low expenses and has highly liquid options in a market based on open interest. The total AUM (assets under management) for QQQ ETF was more than $154 billion in 2022, while the open interest contract accounted for 10.4 million.

Low Expense Cost

The expenses of QQQ ETF are meager; its expense ratio for the third quarter of 2022 was 0.2%. A low expense ratio indicates an increasing return on the investment because expenses get added up from time to time.

Cons of QQQ ETF

Bear Market Risk

The QQQ ETF carries the risk of a bear market. As QQQ performs well during bull markets, there is also the chance of its underperformance during bearish trends. The prices of QQQ ETF went down sharply after the bursting of the dot-com bubble.

Highly Volatile

The stocks of the tech sector carry high growth, and also it is highly volatile, as compared to other industries. The Nasdaq 100 index includes majorly the tech companies, which makes it very volatile compared to other indexes; the QQQ ETF also becomes very volatile. Like in 2018, the return of QQQ ETF was -0.14%, and in the next year, that was, in 2019, it reached 39.12%.

Highly concentrated on the Technology Sector

The underlying index of QQQ ETF is Nasdaq 100 index. In the Nasdaq 100 index, the maximum weightage is given to tech companies like Apple, Alphabet Inc, Microsoft, etc., making it highly concentrated on the tech sector. So, if a downturn comes in the tech sector, the performance of the QQQ ETF also gets affected negatively, even though other sectors are doing well. But due to the high weightage of tech companies, the overall performance is affected. One of the most important cons of QQQ ETF is that it is highly concentrated on the tech sector.

Nasdaq-listed Stocks Only

As we know, the QQQ ETF is based on the underlying Nasdaq 100 index, meaning its performance is based only on the Nasdaq-listed companies. Another shortcoming is that it is only focussed on Nasdaq and excludes other good tech companies like Salesforce, Oracle, etc., that are listed on their exchanges. This bars the QQQ ETF from taking advantage of such successful companies.

No inclusion of Small-Cap Stocks

The holdings of QQQ ETF include only the top 100 companies listed on Nasdaq in which there is no small-cap company. In recent times, small-cap companies have performed better than the other top large-cap companies because there is more room available for their growth.

Whether to buy QQQ ETF or not?

The QQQ ETF is a perfect instrument for bullish traders because of its highly liquid feature and strong portfolio, including giant tech companies. While it is also a matter of concern that there is also the chance of losing a big chunk of money when the index goes down due to such a high valuation.

It offers to buy and hold the options to investors at low expenses that can benefit them in the long run with significant long-term growth potential. Another attractive feature of QQQ ETF that makes it an excellent buy is its diversification, which is also in big strong companies.

The type of risk the investors may encounter while investing in QQQ ETF is sector risk. As we know, half of the QQQ ETF holdings are in the technology sector, so if the tech sector suffers in the future, the overall performance of the ETF will also have to bear the consequences of the fall.

Overall, QQQ ETF can be regarded as one of the best long-term investment instruments due to its robust portfolio and diversification.

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Interesting Facts about Invesco QQQ ETF

  • It is a highly-rated large-cap fund based on the return of the last 15 years. It was ranked 1st under best performing large-cap growth fund.
  • After S&P 500, Invesco QQQ ETF is the most traded ETF in the USA, as per daily average traded volume.
  • It features the top 100 non-financial companies under the same ticker, which are leaders in their sectors having high market capitalization.
  • There are a total of 102 holdings under Invesco QQQ ETF.
  • It is traded only on the Nasdaq stock exchange.
  • Apple Inc has the largest share in QQQ ETF holdings, which is about 61%.
  • The fund name of the QQQ ETF is Invesco QQQ Trust, Series 1.
  • In this ETF, 6% of holdings are of US-based companies, then Chinese companies with a geographical share of 1.26%.

Invesco's 2022 outlook about the QQQ ETF

As per Invesco, in this financial disturbance situation in 2022, investors should opt for investments in equities of companies having high market capitalization and growth potential even in this crisis period.

For that reason, Invesco QQQ ETF is a good investment option because it consists of large-cap companies that are expected to stand firm and perform well in this downturn, as they are innovative and have much more growth potential. The EPS (earnings per share) of QQQ ETF might likely reach up to 7.3%, which is higher than the expected EPS of the S&P 500.

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