The Nasdaq Composite is one of the U.S. stock market's three major indexes, tracking almost every stock on the Nasdaq stock exchange.
The Nasdaq-100 is a subset of the Nasdaq Composite that tracks the largest 100 nonfinancial companies on the Nasdaq stock exchange, and investing in it is one of the more popular ways to invest in the Nasdaq. It's much more concentrated than the Nasdaq Composite, but that has worked out in its favor.
If you have $2,000 available to invest (meaning an emergency fund saved and high-interest debt paid down), the Invesco QQQ Trust (QQQ +0.29%) is a great ETF to consider if you want to invest in the Nasdaq.
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Big tech is leading the way for the ETF
Although this ETF contains 101 stocks, the top 10 holdings do a lot of the heavy lifting, making up almost 50% of the fund's value. Below are its top holdings and how much of the ETF they make up:
| Company | Percentage of the ETF |
|---|---|
| Apple | 8.79% |
| Nvidia | 8.13% |
| Microsoft | 7.65% |
| Amazon | 6.12% |
| Broadcom | 4.54% |
| Meta Platforms (Class A) | 3.92% |
| Tesla | 2.98% |
| Costco Wholesale | 2.88% |
| Alphabet (Class A) | 2.71% |
| Alphabet (Class C) | 2.65% |
Source: Invesco. Percentages as of Feb. 11.
Having 10 stocks account for over half of an ETF's holdings doesn't quite scream diversification, but it's true for many market-cap-weighted ETFs because of skyrocketing big tech valuations.
The bad news is that the performance of these companies will heavily influence the ETF's success (or lack thereof). The good news is that these companies have been some of the top-performing stocks over the past decade. In this case, the worst-performing stock of the bunch at that time is Alphabet's class C stock, and it's up over 570%. Not too shabby.
Big tech has been off to a shaky start in 2025, but that shouldn't be an indictment of its long-term growth potential. Many valuations have admittedly been inflated because of hype fueled by artificial intelligence (AI), but a handful of industries are still on the early side of what they could (and should) become.
With cloud computing, cybersecurity, AI-driven productivity, and semiconductors, the runway for these top holdings is far from over. The key is to stay focused on the long term and become reactive to short-term happenings in the market.
This ETF has a history of outperforming the S&P 500
The S&P 500 -- which tracks the 500 largest U.S. companies on the market -- is the most important index on the U.S. stock market, and it's honestly not even close.
Most stocks and ETFs compare their performance against the S&P 500's to determine whether they are overperforming or underperforming. In this ETF's case, it's the former.
QQQ Total Return Level data by YCharts.
How could a $2,000 play out for investors?
To give you an idea of how lucrative the ETF can be, let's see how a $2,000 investment 20 years ago would fare today.
Now, past results don't guarantee future performance, and there's no way to know how the ETF will perform, but you can see how resilient the ETF can be in the long run -- which is what you should be focusing on.
Even if we assume the ETF grows a more modest 10% annually, a $2,000 investment today could be worth close to $5,100 in 10 years and close to $13,000 in 20 years (accounting for the ETF's 0.20% expense ratio).
If you have reservations about investing the full $2,000 at once, you can take the dollar-cost-averaging approach and break down your investments into smaller installments. You could make two $1,000 investments, four $500 investments, five $400 investments, or whatever you are most comfortable with.
Using dollar-cost averaging could help shield you against sudden drops in the market and reduce the impact of volatility.
