Exchange-traded funds (ETFs) are ready-made portfolios that provide exposure to specific sectors or stock market indexes. The Invesco QQQ Trust (QQQ +0.71%) is the fifth most popular ETF worldwide as measured by assets under management, and several prominent billionaires added to their positions in the first quarter.
- Ken Griffin of Citadel Advisors added 2.2 million shares. The ETF is now the third-largest position in the hedge fund excluding options.
- Israel Englander of Millennium Management added 474,300 shares. The ETF now ranks among the 25 largest positions in the hedge fund excluding options.
- Steven Cohen of Point72 Asset Management added 7,950 shares. The ETF remains a relatively small position in the hedge fund.
Citadel is the most profitable hedge fund as measured by net gains since inception, while Millennium ranks third and Point72 ranks twelfth. That means all three fund managers are good sources of inspiration, and individual investors should consider following their lead here. The Invesco QQQ Trust could turn $400 per month into $384,000 in 20 years.
Read on to learn more.
Image source: Getty Images.
The Invesco QQQ Trust provides exposure to many companies likely to benefit from artificial intelligence
The Nasdaq-100 measures the performance of 100 of the largest non-financial companies on the Nasdaq Stock Exchange. The index is rebalanced quarterly and reconstituted annually in December. For instance, three companies were added to the index at the end of 2024: Axon Enterprise, Palantir Technologies, and Strategy.
The Invesco QQQ Trust tracks the Nasdaq-100. These are the 10 largest positions in the index fund, by weight:
- Microsoft: 8.8%
- Nvidia: 8.8%
- Apple: 7.3%
- Amazon: 5.5%
- Alphabet: 4.8%
- Broadcom: 4.8%
- Meta Platforms: 3.7%
- Netflix: 3.1%
- Tesla: 2.9%
- Costco Wholesale: 2.6%
Importantly, several companies in that list are likely to benefit from demand for artificial intelligence (AI) in the coming years. Microsoft, Amazon, and Alphabet are the three largest public clouds. Apple is building a more sophisticated version of its conversational assistant Siri that will use AI to understand personal context and take actions across other apps.
Meanwhile, Nvidia is the leading supplier of data center GPUs, chips used to speed up AI tasks. It is also the leader in InfiniBand networking, the preferred connectivity technology for backend AI networks. Broadcom is the leader in custom AI and networking silicon. Meta is using AI to make its social media properties more engaging and to help advertisers create media content for campaigns. And Tesla is building autonomous cars and robots.
NASDAQ: QQQ
Key Data Points
How the Invesco QQQ Trust can turn $400 per month into $384,000
Excluding dividends, the Invesco QQQ Trust advanced 1,290% during the last two decades, compounding at 14% annually. But inclusive of dividends, the index fund returned a total of 1,510%, which is equivalent to 14.9% annually.
Importantly, while history suggests gains of 14.9% annually are possible in the next 20 years, I will assume more modest returns of 12.9% annually to introduce a margin of safety. At that pace, $400 invested monthly would be worth $87,900 in one decade and $384,000 in two decades.
Some investors may wish to save more or less than $400 per month. The following chart details how different monthly contribution amounts will grow over time, assuming an annual return of 12.9%.
|
Holding Period |
$100 Per Month |
$200 Per Month |
$600 Per Month |
|---|---|---|---|
|
10 years |
$21,900 |
$43,900 |
$131,900 |
|
20 years |
$96,000 |
$192,000 |
$576,000 |
Data source: returns were determined using the investor.gov compound interest calculator..
Investors need two more pieces of information. First, the Invesco QQQ Trust has been very volatile in the past because it is heavily weighted toward the technology sector, creating concentration risk. Consequently, the index fund fell more than 20% from its record high four times in the past decade. Similar volatility is likely in the future.
Second, the Invesco QQQ Trust has a modest expense ratio of 0.20%, so shareholders will pay $2 annually on every $1,000 invested in the index fund. Comparatively, the average expense ratio of U.S. index funds and mutual funds was 0.34% in 2024.
