Is Invesco QQQ Trust a Millionaire Maker?

Investors are probably familiar with S&P 500an index of 500 large and profitable US businesses. This is often seen as a benchmark for how the global stock market is performing.

However, the Invesco QQQ Trust (QQQ -0.07%) deserves investors’ attention as it has crushed the S&P 500 lately. This exchange-traded fund (ETF) could continue to supercharge returns. But is he a millionaire?

Portfolio composition

The Invesco QQQ Trust differs from the S&P 500 because it tracks the performance of just 100 stocks. These are the largest non-financial companies on the Nasdaq stock exchange, known as Nasdaq 100 Index.

Investors should understand which areas of the economy shine brightly in this ETF. The information technology sector holds a significant 50.3% stake in Invesco QQQ Trust. Businesses that are part of “Magnificent seven” combined make up a remarkable 42.5% of the entire portfolio. Therefore, the performance of these stocks has a large influence.

This has been a benefit in recent years. Companies in this group of seven are driven by strong technology-enabled tailwinds that have boosted their prospects. Digital advertising, cloud computing, digital payments, electric vehicles, online shopping and streaming entertainment are some trends to watch out for.

The average investor who wants exposure to these tailwinds need not pick individual stocks. Buying and holding the Invesco QQQ Trust provides adequate exposure.

Fantastic performance

While it’s essential to know what this ETF holds, investors are definitely more concerned about performance — which is what matters when it comes to long-term wealth creation.

Over the past five years, the Invesco QQQ Trust has produced a total return of 169%. A $10,000 investment made in September 2019 would be worth nearly $27,000 today. That’s an impressive gain for a passive investment vehicle and outperforms the S&P 500.

What is also worth mentioning is the cost of owning this ETF. The expense report it is only 0.20%. This means that for every $10,000 you invest, only $20 goes toward annual fees. That’s hard to beat.

Cathie Wood and her firm ARK Invest have received a lot of attention in recent years. Investors like the focus on owning innovative and disruptive companies, which is similar to Invesco QQQ Trust’s strategy.

However, the ARK Innovation ETFARK Invest’s flagship fund, charges a 0.75% expense ratio, but has earned just 16% over the past five years. Performance has been very disappointing, even though this fund costs almost four times as much as the Invesco QQQ Trust.

It reaches 1 million dollars

In the past three months, the Invesco QQQ Trust has seen two notable declines, and there’s no question that this ETF is likely to have more volatility than the S&P. It is more concentrated in technology stocks, which have higher ups and downs.

Investors may be wondering if it’s still a good time to invest while QQQ is trading near all-time highs. It is essential to never forget that time in the market matters more than anything else. It can be tempting to trade in and out of stocks to avoid lows, but trying to time the market is a losing business.

From its inception in 1999 to today, the Invesco QQQ Trust has reportedly turned an initial outlay of $90,000 into a million dollars. I think it is reasonable to assume a similar rate of return in the future. This means that investors who are able to adopt a long-term time horizon and for those who can invest more money upfront, reaching $1 million is a realistic outcome, perhaps even in a shorter period of 25 years.