Tech stocks and growth stocks in general have been flying high in recent years. The excitement around artificial intelligence (AI) has resulted in many stocks reaching new highs and becoming very expensive along the way.
The Invesco QQQ Trust (QQQ 1.72%) has been a terrific investment for long-term investors, and it has risen by around 84% in the past five years. That averages out to a compounded annual growth rate of about 13%. That's a solid return given that the S&P 500 has historically averaged returns of about 10% per year.
However, it begs the question of whether growth stocks have been too hot and whether investing in the Invesco fund is still a good option for investors in 2026. Is this exchange-traded fund (ETF) still likely to head higher, or could it be overdue for a big decline?
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Why the Invesco fund could face some volatility in the short term
The Invesco fund gives investors exposure to the most valuable stocks on the Nasdaq exchange. It tracks the Nasdaq-100 index, which includes the largest non-financial stocks that are on the exchange. But that can sound risky, especially if you're worried about inflated valuations in the market right now.
Many of the fund's top holdings are stocks that aren't cheap these days, and which could be due for significant declines. This includes Palantir Technologies and Tesla, which both trade at more than 200 times their trailing earnings and may have a long way to fall if there's a correction in the markets. And these are just among the most expensive stocks in the QQQ ETF; there are other high-priced stocks that may not be as obscenely valued, but which may still be overvalued. This is why in the short term, there could be some challenges ahead for the Invesco ETF, and as of Monday's close, the fund has been flat since the start of the year.
NASDAQ: QQQ
Key Data Points
Can the Invesco fund still make for a good long-term investment?
If your focus is on the long term and you are planning to invest in the ETF for at least five-plus years, then I think the Invesco ETF can still make for a sound investment option. Even though there are some expensive and overpriced stocks within the ETF that could drag its performance down in the near term, the fund still gives investors a great way to gain exposure to the top growth stocks in the world.
The ETF recovered from a disastrous 33% decline in 2022 when the stock market crashed due to economic concerns about inflation, and it'll likely bounce back from any future downturn as well. As long as you're not in a rush to sell, then you can just stay the course and remain invested, knowing that in the long run, the fund is highly likely to generate strong returns for your portfolio.
