Considering an Investment in the Nasdaq? Explore This Promising ETF for the New Year

When discussing investments in the Nasdaq, the term can refer to different things. For many, it means investing in the Nasdaq Composite, which is one of the major stock market indices in the U.S. It encompasses nearly all stocks listed on the Nasdaq (NDAQ) stock exchange. For others, it refers specifically to the Nasdaq-100, which consists of the 100 largest non-financial stocks within the Nasdaq Composite.

Choosing between these two options depends on individual preferences. The Nasdaq Composite offers a broader and more diversified portfolio with over 2,500 companies, while the Nasdaq-100 focuses on the top performers.

As we approach the new year, investors might find the Nasdaq-100 exchange-traded fund (ETF) to be an appealing option. One of the most recognized ETFs in the market is the Invesco QQQ Trust (QQQ). This fund has shown impressive returns over many years and is well-regarded among investors.

Growth Potential of Top Holdings in the ETF

This ETF is managed on a market-cap-weighted basis, meaning larger companies are more heavily represented in the fund. As a result, several leading tech giants dominate the portfolio of this ETF. Below are its top ten holdings:

Company	Percentage of the ETF
Apple	8.96%
Nvidia	7.88%
Microsoft	7.83%
Amazon	5.62%
Meta Platforms	5.12%
Broadcom	4.89%
Tesla	4.61%
Costco Wholesale	2.70%
Alphabet (Class A)	2.58%
Alphabet (Class C)	2.48%

Data source: Invesco. Percentages as of Dec. 10.

Although these ten companies make up over 52% of the ETF, the fund may not be as diversified as one might hope. Nonetheless, these leading companies have substantial growth potential looking forward to 2025 and beyond. They are already aligned with significant trends such as artificial intelligence (AI), cloud computing, and electric vehicles (EV).

While AI might not be a standalone industry, it is expected to bring significant transformations across various sectors. Companies like Nvidia and Microsoft are at the forefront, supplying essential components like graphics processing units (GPUs) and advanced data centers that support AI development.

Cloud computing is still gaining traction, and the leaders in this field, namely Amazon, Microsoft, and Alphabet, have established significant market shares: 31%, 20%, and 11%, respectively.

As for the global electric vehicle market, which was valued at over $500 billion in 2023, predictions suggest it could soar to nearly $1.9 trillion by 2032, highlighting a compound annual growth rate of approximately 14%. Although Tesla stands as the sole EV manufacturer in the ETF's top ten, it collaborates with various firms for hardware and software support.

The ETF's Historical Performance

The Invesco QQQ Trust has experienced substantial growth since its inception in March 1999. Over the past 25 years, it has delivered returns exceeding 930% as of December 12, averaging annual returns around 9.5%. This performance has outstripped that of the S&P 500. In practical terms, a $1,000 investment made at its launch would now be worth more than $10,300.

Although past performance cannot guarantee future results, the ETF has demonstrated resilience during challenging market conditions, including the dot-com crash, the Great Recession, and the COVID-19 pandemic.

Another advantage is the expense ratio of just 0.2%. This means an investor pays only $2 annually for every $1,000 invested, which is not as low as some cheaper S&P 500 ETFs, like certain options from Vanguard at 0.03%, but remains very reasonable.

While the cost of an ETF might not be the first priority for investors, even slight differences can result in significant savings over time. The Invesco QQQ Trust presents a comparatively low-cost choice with proven success and promising growth ahead for its main holdings.

Investment, ETF, Nasdaq