Forget the S&P 500 — Buy this magnificent ETF instead

There is no doubt that S&P 500 is the most attentive stock market index. The group of approximately 500 large and profitable companies provides investors with a clear assessment of stock performance. And it has historically been a popular investment choice.

Over the past decade, the S&P 500 has generated a total return of 232%. That translates into an impressive percentage of 12.7% per year. However, there is one thriving exchange traded fund (ETF) that has performed even better than investors should consider buying right now.

Unique market exposure

Investors should familiarize themselves with Invesco QQQ Trust (QQQ 0.13%). This ETF tracks performance Nasdaq-100 iindexwhich consists of the 100 largest non-financial companies trading on the Nasdaq Composite.

The S&P 500 has solid exposure to various industries. But QQQ is heavily tilted towards the technology sector. As of August 9, 50% of the ETF’s assets were represented by these types of businesses.

It should come as no surprise that “Magnificent seven” reigns supreme. Combined, Alphabet, Amazon, Apple, Meta platforms, Microsoft, Nvidiaand adze represents 42% of the entire fund. The better these stocks perform, the higher their share in QQQ.

With these seven companies benefiting from many secular headwinds such as cloud computing, digital advertising, streaming entertainment and electric vehicles, the growth has been notable. And all are exposed to the ongoing boom in artificial intelligence (AI) in one form or another. The focus on disruptive and innovative businesses means investors haven’t had to identify individual stocks that can outperform. While some may consider this ETF to be riskier, owning it has proven to be a rewarding endeavor.

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Stellar performance

Performance is probably the most important variable that attracts investors. While the S&P 500 has done well over the past decade, it doesn’t hold a candle to the Invesco QQQ Trust. The latter generated a phenomenal total return of 412% since August 2014, which would have turned an initial investment of $10,000 into over $51,000 today. There is no doubt that this strong performance also outperforms most active fund managers.

The technology sector shines brightly, but communications services and consumer discretionary stocks are also well represented. The strength of the economy for most of the last 10 years, supported by low interest rates and an accommodative Fed, certainly helped.

The returns are hard to ignore, but investors will cheer to know that QQQ charges a small expense report of 0.2%. Only $20 for every $10,000 in capital invested goes toward paying the tax. That’s a very small price to pay for such an impressive performance.

Buy dip

The Invesco QQQ Trust is taking a mid-summer lull as it trades about 10% off its all-time high since last month. A spin in tech stocks and weak economic data isn’t helping the cause. As a result, investors may think it is best to wait to buy until there is more clarity.

I consider this to be the wrong approach. Trying to time the market correctly is a losing proposition and can do more harm than good. It is more important, in my opinion, to invest early and often, especially for those people who have a very long time horizon.

While I don’t think QQQ will post the same kinds of gains it has had in the recent past, which have been exceptional, it still looks like a worthy investment option that has the potential to continue beating the S&P 500. The latest dip means it’s a good time to buy.