The Nasdaq Composite is one of the U.S. stock market's three main indexes, along with the S&P 500 and Dow Jones. It tracks the 3,000-plus companies listed on the Nasdaq stock exchange and has become a popular go-to for investors because of how tech-leaning it is.
The Nasdaq-100 is a subset of the Nasdaq Composite, tracking the 100 largest non-financial stocks on the Nasdaq stock exchange. It's a far more concentrated index than the Nasdaq Composite, but this concentration is partly why it's many investors' favorite way to invest in the Nasdaq.
The Nasdaq-100 has underperformed the Nasdaq Composite and S&P 500 this year, but it has noticeably outperformed them over the past decade.
^NDX data by YCharts.
Past performance doesn't guarantee future success, but the Nasdaq-100 has shown encouraging long-term resilience. If you're looking for a Nasdaq ETF, the newly created Invesco Nasdaq 100 ETF (QQQM 0.11%) is a great option. A $1,000 investment today could go a long way in the future.
This exchange-traded fund is a great mix of stability and growth potential because of the industries and the size of the companies in the fund. It's by no means exempt from volatility or down periods, but the top companies leading the way for the ETF are market leaders in their own right and well-established.
Below are the ETF's top 10 holdings. It's market cap-weighted, so larger companies account for more of the fund.
Company | Percentage of the ETF |
---|---|
Apple | 8.99% |
Nvidia | 8.51% |
Microsoft | 7.82% |
Broadcom | 5.42% |
Meta Platforms | 5.04% |
Amazon | 4.99% |
Tesla | 2.68% |
Costco Wholesale | 2.56% |
Alphabet (Class A) | 2.41% |
Alphabet (Class C) | 2.32% |
Data source: Invesco. Percentages as of Oct. 18.
The top holdings account for over 50% of the 102-stock ETF, which isn't usually ideal if you're looking for diversification, but it has worked out in its favor. Alphabet is the worst-performing stock out of the bunch in the past decade, and it's up over 510% in that time. That's not a bad "worst" to have.
AAPL data by YCharts.
The top companies in the ETF are leading the way in many high-growth industries like cloud computing, artificial intelligence, semiconductors, electric vehicles, and e-commerce. It leans heavily to the tech sector, but it also contains companies from other major sectors:
A slump in the tech sector will definitely affect the ETF's returns (or lack thereof), but at least it's not entirely dependent on the tech sector and has other areas that can pick up some of the slack.
This ETF's near-match is the Invesco QQQ Trust ETF, the second-most traded ETF in the U.S. Both companies mirror the Nasdaq-100 and hold the same companies, but the one difference between them is cost. The Invesco Nasdaq 100 ETF is a tad bit cheaper, with a 0.15% expense ratio compared to the Invesco QQQ Trust ETF's 0.20%.
A slight 0.05% difference between the ETFs may not seem like much, but it can add up to hundreds, if not thousands, of dollars over time. For perspective, imagine you invest $500 into each ETF and average 10% annual returns over 25 years. At the end of that span, you would've paid just over $13,100 in fees with the Invesco Nasdaq 100 ETF and just over $17,400 in fees with the Invesco QQQ Trust ETF.
If the only difference between the two ETFs is cost, it makes sense to go with the cheaper option and keep more money in your pocket.
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