When it comes to investing in exchange-traded funds (ETFs) that track an index, the most popular by far are ones that aim to replicate the performance of the S&P 500, such as the Vanguard S&P 500 ETF and SPDR S&P 500 ETF Trust. In fact, the three largest ETFs based on assets under management all track the index.
There is a good reason for this. The S&P consists of around the 500 largest companies traded in the U.S. based on market capitalization, and the index is considered the benchmark for the U.S. stock market. It's been a strong performer over the long term, and few professional fund managers have been able to consistently outperform the index over a long period.
One of the keys to the success of the S&P 500 is that it is a market-cap weighted index that lets its winners run and become a larger percentage of the index as the stocks outperform and their market caps grow. This is how stocks like Apple, Microsoft, and Nvidia have grown to become the largest in the index.
However, there is one index ETF that has performed even better than the ones tracking the S&P 500, and there is a good case that this is the smartest ETF to begin buying right now.
Image source: Getty Images.
The Invesco QQQ Trust
The Invesco QQQ Trust ETF (QQQ) replicates the performance of the Nasdaq-100, which is made up of the 100 largest nonfinancial stocks on the Nasdaq exchange. While few fund managers have been able to consistently outperform the S&P 500, the Invesco QQQ Trust has not only been able to outperform it, but its returns have also crushed it.
As of May 28, the ETF had generated a cumulative return of 408% over the past 10 years versus 233% for the S&P 500 over the same period. It has outperformed the S&P 500 over 12-month rolling periods nearly 88% of the time over the past decade, and nearly 84% of the time in the last five years. That shows that the fund has not just had a couple of strong years of outperformance, but that it also has been able to consistently top the performance of the S&P 500 over the past 10 years.
Data by YCharts.
Like the S&P 500, the Nasdaq-100 is a market-cap weighted index that lets its winners run. However, it is more heavily weighted to tech and growth stocks than the S&P 500.
At the end of March, nearly 60% of the ETF's holdings were in the technology sector, although some companies, such as Amazon and Tesla, with big tech components, are classified into other sectors.
Here is a list of the Invesco QQQ ETF's top holdings and their weightings as of May 23, 2025:
| Holding | Weighting | Holding | Weighting | |
|---|---|---|---|---|
| 1. Microsoft | 8.6% | 6. Broadcom | 4.6% | |
| 2. Nvidia | 8.3% | 7. Meta Platforms | 3.5% | |
| 3. Apple | 7.6% | 8. Netflix | 3.2% | |
| 4. Amazon | 5.5% | 9. Tesla | 3.2% | |
| 5. Alphabet | 4.9% | 10. Costco Wholesale | 2.8% |
Data source: Invesco.
It is the Invesco QQQ ETF's weighting toward large growth tech stocks that makes it so attractive. Right now, we are at perhaps one of the biggest generational shifts in technology of our lifetime with artificial intelligence (AI). It is likely to help reshape the world we live in over the next decade.
Megacap technology stocks are helping lead the charge with AI, setting them up to be continued winners, while upstarts can also quickly climb up the ladder of its holdings. For example, Palantir Technologies' strong performance has led it to become the ETF's 11th-largest holding.
Investing strategies for QQQ
Now, a sum as low as $100 is a great place to start investing in the Invesco QQQ Trust. However, this is just a start, and you'll want to consistently invest in it on a regular basis, regardless of whether it is performing well or has fallen. This is referred to as a dollar-cost averaging strategy, and it is one of the best ways to create long-term wealth.
When the market is down, you'll get more shares with your regular investment, while you'll be able to ride the market's momentum when the ETF is going up. Investing once a month or semimonthly is a great way to execute this strategy.
So if you want to start investing in some of the world's leading tech and growth companies and have a limited budget, the Invesco QQQ Trust ETF is a great place to start.
