Choosing winners in the fast-paced artificial intelligence (AI) race isn't always easy. Small AI start-ups can flame out quickly, while large companies run the risk of failing to keep up. Many investors opt to put their money in exchange-traded funds (ETFs) that track indexes to spread their money across a variety of companies.
One of the most popular ETFs with a lot of exposure to AI stocks is the Invesco QQQ Trust (QQQ 0.49%). The fund is designed to track the performance of the Nasdaq-100 index, and investing in it is a great way to benefit from the AI race without having to handpick the winners. Here's why.
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1. It has exposure to the top AI companies
The Invesco QQQ Trust's largest holdings are key players in the AI race and have already benefited -- and will likely continue to benefit -- as artificial intelligence grows. With this fund, you'll be invested in Microsoft, Nvidia, Amazon, and Alphabet, as well as other tech companies making big moves in AI.
Consider that Nvidia is one of the leading AI processor companies, with an estimated 95% of the AI processor market, and that Amazon and Microsoft are the two largest cloud computing companies offering advanced AI services to their customers.
All of this means that owning some of Invesco QQQ Trust will allow you to tap into AI processors, AI cloud services, artificial intelligence software, and likely whatever new AI products and services debut over the coming years.
2. ETFs are a great investment for beginners and experts alike
Whether you're just getting started in investing or you've been doing it for decades, ETFs are a great addition to any portfolio because they allow you to take some of the guesswork out of investing. Instead of poring over earnings calls and keeping tabs on how some macroeconomic news might affect the specific company you're invested in, you can instead spread your money across many companies all at once.
Plus, with the Invesco QQQ Trust, your investment will track the combined movements of the top 100 non-financial companies on the Nasdaq, many of which are the world's leading tech companies. As hundreds of billions of dollars are invested in AI in the coming years, this fund could continue to benefit from the strong artificial intelligence foundation that's already been established.
NASDAQ: QQQ
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3. Easy liquidity and relatively low costs
Being the fifth-largest ETF, you won't have much of a problem buying or selling your shares of the Invesco QQQ Trust. A substantial amount of daily trading volumes and about $354 billion in assets under management mean that you'll easily find a buyer when you're ready to sell.
What's more, the fund has a relatively low expense ratio of just 0.20%. If you have $1,000 in the fund, your annual expense ratio is just $2 in fees. Since it's passively managed, the Invesco QQQ Trust charges far less than actively managed funds, which select stocks in an attempt to outperform specific indexes. Lower expense ratios help you keep more of the gains earned by the fund.
4. The Invesco QQQ Trust has been a top performer
No matter where you invest your money, there's always a risk that your investments won't perform well. And even if they do make significant gains when you own them, there's no guarantee they'll continue to do so.
But there's something to be said for funds that historically perform well over time. Since its launch in 1999, the Invesco QQQ Trust has gained nearly 1,000% while the S&P 500 is up about 400%. Of course, that doesn't mean it will continue growing at the same pace or even that the fund will outpace the broader market's returns in the coming years. Still, it's an indication the fund has, in the past, successfully benefited from large tech trends.
If you have $1,000 to spend right now and want to tap into artificial intelligence, this fund is a smart move. While there may be others with more focused exposure to AI, the Invesco QQQ Trust allows you to benefit from the largest technology companies on the Nasdaq, which could provide stability and long-term opportunity.
