Supercharge Your Retirement Account With This Powerful ETF | Smart Change: Personal Finance


Slow and steady wins the race — it’s generally quite true when it comes to investing. Invest regularly in the overall stock market for many years and you’re likely to amass a sizable nest egg.

But what if you want to do better than that? Well, you might add shares of a certain ETF, because it’s full of many businesses that are not only strong and growing, but are also, in many cases, trading at lower valuations than they have in a long time, because of the stock market’s recent pullback.

Meet the QQQ

The Invesco QQQ ETF (NASDAQ: QQQ) is an exchange-traded fund (ETF) — very much like a mutual fund that trades very much like stocks do. (In other words, you can buy as much or as little of it as you want via your regular brokerage account.) The ETF is an index fund, tracking the Nasdaq-100 Index of 100 largest non-financial companies listed on the Nasdaq stock exchange, based on market cap.

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The folks at Invesco note that the Invesco QQQ is “rated the best-performing large-cap growth fund (1 of 317) based on total return over the past 15 years by Lipper, as of [March] 31, 2022.”

Here are some more reasons you might want to add it to your portfolio:

It has a solid performance record

Average Annual Return Over…

Invesco QQQ Trust’s Performance

5 years

15.99%

10 years

17.52%

15 years

13.61%

Data source: Morningstar.com as of June 28, 2022.

Pretty impressive, right? And those numbers reflect a recent drop in value, too: The ETF’s price was recently down more than 28% year to date.

It charges fairly low fees

Many ETFs do charge lower expense ratios (annual fees) than the Invesco QQQ, but the Invesco ETF’s fees are still reasonably low, at 0.20%. Invest, say, $10,000 in the ETF and you’ll pay about $20 for the year in fees.

You can be instantly diversified

As with most mutual funds and ETFs, the Invesco QQQ will distribute your money across a host of different securities — in this case, 100 different companies.

You don’t have to pick and choose among leading technology-heavy companies

A big advantage of funds is that they do the selection of investments for you, relieving you of the work of studying companies and making buy-and-sell decisions over a long period.

Here are the top 15 companies in the Invesco QQQ — and the portion of your money that was recently allocated to each:

Company

Allocation

Apple

12.46%

Microsoft

10.76%

Amazon.com

6.26%

Tesla

4.14%

Alphabet, Class C

3.97%

Alphabet, Class A

3.79%

Nvidia

3.22%

Meta Platforms

3.16%

PepsiCo

1.92%

Costco

2.06%

Data source: Invesco.com.

Those are the biggest holdings, but among the other 90 stocks are plenty that you might know and might welcome in your portfolio, such as:

  • Airbnb
  • CrowdStrike
  • Datadog
  • DocuSign
  • Intuitive Surgical
  • Netflix
  • Palo Alto Networks
  • PayPal
  • Qualcomm
  • Starbucks
  • Texas Instruments
  • Vertex Pharmaceuticals
  • Zoom Video Communications

You can grab bargains easily

This is an especially auspicious time to invest in this ETF, since so many of its holdings have fallen so sharply lately. Check out a few examples:

Company

Recent Drop From 52-Week High

Zoom Video Communications

83%

PayPal

77%

Netflix

74%

Meta Platforms

58%

Nvidia

54%

Airbnb

54%

Intuitive Surgical

45%

Amazon.com

43%

CrowdStrike

42%

Starbucks

40%

Microsoft

27%

Alphabet

26%

Apple

25%

Costco

23%

Data sources: Yahoo! Finance and author calculations.

If these are the kinds of companies you’d like to own, it’s best to buy them at lower prices, which is where they are these days.

You can collect dividends

Since more than a few of the ETF’s holdings are dividend payers, the ETF pays a dividend, passing those payouts out to shareholders. It’s not an enormous one, though, recently yielding 0.67%.

There’s a compelling case for parking some of your money in the Invesco QQQ ETF, in the hope of supercharging your portfolio, but it’s not the only game in town. A little digging online will turn up many other great index funds and growth stocks.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions in Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Costco Wholesale, Datadog, DocuSign, Intuitive Surgical, Meta Platforms, Inc., Microsoft, Netflix, PayPal Holdings, Starbucks, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Airbnb, Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Costco Wholesale, CrowdStrike Holdings, Datadog, DocuSign, Intuitive Surgical, Meta Platforms, Microsoft, Netflix, Nvidia , Palo Alto Networks, PayPal Holdings, Qualcomm, Starbucks, Tesla, Texas Instruments, Vertex Pharmaceuticals, and Zoom Video Communications. The Motley Fool recommends the following options: long January 2024 $60 calls on DocuSign, long March 2023 $120 calls on Apple, short July 2022 $85 calls on Starbucks, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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