2 Nasdaq ETF in the first quarter of 2022

Investors who want to own stocks in the technology industry may decide to buy exchange-traded funds (ETFs) that track the Nasdaq index. When investors refer to Nasdaq, they usually refer to the high-tech Nasdaq Composite Index, which is made up of more than 2,500 companies. The size and quality of this group of companies vary greatly, including troubled young companies and dominant mature companies.

The Nasdaq 100 Index is another way for investors to effectively track the broader Nasdaq Composite Index. Nasdaq-100 tracks the 100 largest non-financial companies listed on the Nasdaq Stock Exchange and weights them according to a revised market capitalization strategy. Many companies, including the world’s largest technology stocks and retail, biotechnology, industrial and healthcare stocks, are included in the index. The Nasdaq 100 index also includes companies such as video game maker Activision Blizzard Inc. (ATVI) and soft drink maker PepsiCo Inc. (PEP).

Investors seeking to diversify their holdings and reduce risk may consider ETFs that focus on the Nasdaq 100 index.

Key points

  • The Nasdaq 100 Index is an index of the 100 largest non-financial companies listed on the Nasdaq Stock Exchange.
  • The Nasdaq 100 Index has outperformed the market in the past year.
  • The two exchange-traded funds (ETFs) targeting the Nasdaq 100 are QQQM and QQQ.
  • The top three holdings of the two ETFs are Apple, Microsoft and Amazon.

Only two ETFs traded in the United States meaningfully target the Nasdaq 100: Invesco QQQ (QQQ) and Invesco Nasdaq 100 ETF (QQQM). The third fund, the Invesco ESG Nasdaq 100 ETF (QQMG), was launched in October 2021, but it did not have enough historical data to be included in InvestingClue’s ranking. The Nasdaq 100 Index has performed slightly better than the broader market in the past year. As of December 3, 2021, the total return of the Nasdaq 100 index in the past 12 months was 26.9%, slightly higher than the 25.6% total return of the S&P 500.

We will examine QQQM and QQQ in more detail below. All data below are as of December 2, 2021.

  • Performance over one year: 29.1%
  • Expense rate: 0.15%
  • Annual dividend yield: 0.44%
  • 3-month average daily volume: 563,231
  • Assets under management: US$3.4 billion
  • Date of Establishment: October 13, 2020
  • Issuer: Invesco

QQQM is a slightly lower cost version of QQQ, launched by Invesco in October 2020. This newer “Q-mini” fund is almost the same as QQQ. Like its older counterpart, it also tracks the Nasdaq 100. However, its lower fees, lower stock price, and the ability to reinvest dividends, all of which may be more attractive to savers who buy and hold.

We should note that the traditional QQQ combines larger scale and greater liquidity, making it a relatively cheap choice for many large institutional investors and high-speed trading companies.

  • Performance over one year: 29.0%
  • Expense rate: 0.20%
  • Annual dividend yield: 0.45%
  • 3-month average daily volume: 44,805,728
  • Assets under management: US$208.7 billion
  • Date of Establishment: March 10, 1999
  • Issuer: Invesco

QQQ has become one of the most popular ETFs. The absolute scale of its daily trading volume shows that it is widely used as a tool for short-term trading compared to long-term investments. Its high liquidity makes frequent transactions relatively cheap. But this does not rule out that it is useful for tactical exposure to the technology industry in a buy-and-hold strategy.

QQQ is not the most diversified ETF because it only owns non-financial companies and its weight is extremely low. More than half of its holdings belong to the information technology sector, and the other third of the shares are almost evenly allocated to communications services and consumer discretionary stocks.

Below, we list the top 10 holdings of QQQM and QQQ.

Top QQQ and QQQM holdings
Company name (code) Percentage of total assets company description
Apple Inc (AAPL) 11.7% Computer, software, service
Microsoft Corporation (MSFT) 10.7% Computers, cloud services, software
Amazon Corporation (AMZN) 7.5% E-commerce, cloud computing
Tesla Inc (TSLA) 5.8% electric car
Nvidia Corporation (NVDA) 5.3% Computing and chips
Alphabet Inc. (GOOG) (Class C shares) 4.0% Search engines, software and cloud computing
Alphabet Inc. (GOOGL) (Class A shares) 3.7% Search engines, software and cloud computing
Meta Platforms Inc. (FB) (Class A stock) 3.2% social media
Adobe Corporation (ADBE) 2.1% Software for publishers and creators
Netflix (NFLX) 1.8% Streaming video

The comments, opinions and analysis expressed here are for reference only and should not be regarded as personal investment advice or advice on investing in any securities or adopting any investment strategy. Although we believe that the information provided here is reliable, we do not guarantee its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Due to the rapidly changing market and economic conditions, all comments, opinions and analyses contained in our content are presented on the date of publication and may change without notice. This material is not intended to provide a complete analysis of every important fact about any country, region, market, industry, investment or strategy.

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