Want to Invest within the Nasdaq? This ETF Is a Great Option Heading Into the New Year

When folks check with investing within the Nasdaq, it may imply a number of various things.

For some, it means investing within the Nasdaq Composite, one of many U.S. inventory market’s important three indexes that features just about each inventory on the Nasdaq (NDAQ -0.93%) inventory alternate. For others, it means investing within the Nasdaq-100, a subset of the Nasdaq Composite, monitoring the 100 largest non-financial shares within the index.

Neither possibility is outright higher than the opposite; it is all about choice. The Nasdaq Composite is far bigger and extra diversified (over 2,500 firms), whereas the Nasdaq-100 is concentrated within the greatest names.

Looking forward to the brand new 12 months, an excellent possibility for traders is a Nasdaq-100 exchange-traded fund (ETF), such because the Invesco QQQ Trust (QQQ 0.77%). It’s one of many inventory market’s hottest ETFs, and it has delivered wonderful returns going again a few years.

Data by YCharts.

There are many progress alternatives for the ETF’s high holdings

This ETF is market-cap-weighted, so bigger firms make up extra of the fund than smaller ones. This has led to a handful of megacap tech shares main the cost. Below are the ETF’s high 10 holdings:

Data supply: Invesco. Percentages as of Dec. 10.

With 10 firms making up over 52% of the ETF, it’s miles from the diversification poster little one. However, these firms have nice progress prospects heading into 2025 (and past). It all begins with a number of megatrends with plenty of momentum: synthetic intelligence (AI), cloud computing, and electrical autos (EV).

AI might not be an business in itself, however it appears to be properly on the best way to reworking many industries. Between graphics processing items (GPUs), knowledge facilities, semiconductors, machine studying, and different instruments wanted to coach AI, the businesses listed above are on the forefront of that cost.

Cloud computing stays within the early levels of adoption, however Amazon, Microsoft, and Alphabet at present lead the market with 31%, 20%, and 11% market shares, respectively.

The world EV market was valued at simply over $500 billion in 2023 and is anticipated to succeed in almost $1.9 trillion by 2032, representing a compound annual progress charge of just below 14%. While Tesla is the one EV maker within the high 10, it depends on others for {hardware} and software program parts.

This ETF has a historical past of market-beating efficiency

The Invesco QQQ Trust has been on a roll because it hit the inventory market in Mar. 1999. In these 25 years, it has returned over 930% (as of Dec. 12) and averaged round 9.5% annual returns — each figures beat out the S&P 500. Every $1,000 invested within the ETF from its inception could be value over $10,300 now.

Data by YCharts.

You cannot use historic efficiency to foretell future efficiency, however it’s encouraging figuring out the ETF has held its personal by way of some tough durations available in the market, together with the dot-com bubble burst, the Great Recession, and COVID-19 pandemic.

It’s additionally encouraging to know you can maintain a lot of your positive aspects to your self. This ETF’s expense ratio is 0.2%, which means you will pay $2 for each $1,000 invested yearly. It’s not as low-cost as some S&P 500 ETFs (like this Vanguard possibility at 0.03%), however it stays cheap total.

The value may not be the primary element you take into account when selecting an ETF, however slight variations may add as much as hundreds of {dollars} over the lengthy haul. This ETF is a comparatively low-cost possibility with confirmed outcomes and big progress alternatives forward for its core holdings.