Investing in growth stocks can be a great way to generate outsize gains and bolster your portfolio. However, one of the more daunting aspects of investing is choosing individual stocks and figuring out when to cash out your positions. One way to mitigate these dynamics is through index funds, which provide a passive way to generate wealth through steady contributions and a long-run investment horizon.
Let's explore why the Invesco QQQ Trust (QQQ 0.42%) is a standout performer and assess how a starting point of just $100 can help you become a millionaire.
What is the Invesco QQQ Trust?
The Invesco QQQ ETF is an index fund that tracks the performance of the Nasdaq-100. The Nasdaq is a tech-heavy index, and so investing in the Nasdaq-100 gives you a number of high-profile companies, including Palantir Technologies, Broadcom, Adobe, CrowdStrike, Meta Platforms, Alphabet, Microsoft, Netflix, and many more.
By gaining exposure to these companies, investors are able to passively invest in emerging themes such as artificial intelligence (AI), cybersecurity, streaming, and semiconductors. In addition, the Invesco QQQ also holds positions in leading international businesses such as MercadoLibre as well as companies that dominate industries outside of technology, such as Costco.
What's nice about investing in the Nasdaq-100 is that your growth portfolio does not hinge on the performance of a single company. Growth stocks generally experience outsize volatility compared to blue chip stocks. However, owning the entire Nasdaq-100 index mitigates some of these risks thanks to its diversified holdings across different industry sectors, company sizes, and geographic demographics.
Another enticing aspect of owning the Invesco QQQ is that its expense ratio is just 0.20%. This means that for every $100 you invest, you'd pay just $0.20 in annual fees.
How has the Invesco QQQ Trust performed over time?
The chart below compares the performance of the Invesco QQQ ETF against that of the S&P 500 (SNPINDEX: ^GSPC) since the fund's inception. In the long run, the Invesco QQQ boasts a total return of roughly 1,000% -- absolutely trouncing the performance of the S&P 500 index. In addition, the index has also shown consistent rebounds following periods of economic recession, as illustrated by the grey-shaded columns. I think this underscores the resiliency of the businesses that comprise the Nasdaq-100, solidifying its appeal as a market-beating investment vehicle.
QQQ Total Return Level data by YCharts
Can investing in the Invesco QQQ Trust make you a millionaire?
The Invesco QQQ Trust's performance versus the S&P 500 isn't particularly surprising, especially in recent years. For the last couple of years, megacap technology stocks in particular have witnessed generational gains thanks to the AI revolution. Gains of this magnitude are not sustainable in perpetuity, but with that said I am optimistic that the Nasdaq-100 will continue to outperform the long-run performance of the S&P 500.
In the table below, I've summarized what a starting investment of $100 would look like assuming a 15% annual return from the Nasdaq-100.
| Years Invested | Amount |
|---|---|
| 1 | $1,315 |
| 5 | $8,291 |
| 10 | $24,769 |
| 15 | $57,910 |
| 20 | $124,568 |
| 25 | $258,643 |
| 30 | $528,315 |
| 35 | $1,070,721 |
Source: Author's calculations.
While the parameters of a $100 monthly contribution and 15% annual return from the Invesco QQQ yield a total just over $1 million, the more important thing to take away from above is that you'll need to hold on to your position for many years (i.e., decades). This underscores the idea that building wealth often requires a long-term time horizon and consistent contributions to winning positions.
