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Over the years, the rise of tech has been undeniable. Of course, being in the midst of a strong bull market always helps, but these companies have been a big catalyst for that move. As a result, the Invesco QQQ ETF (NASDAQ:QQQ) has been a major beneficiary, with the QQQ being a huge winner over the last decade.
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As we shift from one decade to the early parts of another, investors shouldn’t expect tech to underwhelm. If anything, they should expect the opposite: for tech to continue leading the charge.
Tech companies have something that many others don’t, which is scale. Oftentimes, that scale is also accompanied by low overhead.
That’s not always the case, as there can be some pretty large expenditures. But by and large, top technology firms tend to sport the fastest growth, the best margins and the largest markets. Not just in their respective industries — like software or semiconductors — but in the market as a whole.
QQQ Stock vs. Its Peers
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Source: Chart courtesy of TrendSpider
While tech stocks are the predominant sector exposure of the QQQ, it’s not the only exposure it has. Either way, it doesn’t matter. Performance is what matters, and the QQQ stock is dominant.
First of all, over the last 10 years, the Invesco QQQ ETF has had only one single down year. In 2018, shares lost a whopping 0.14%. In other words, it’s been flat.
The other worst three years saw returns of 3.4% (in 2011), 7% (in 2016) and 9.5% (in 2015).
In the other six years, the QQQ generated returns of at least 18%, with three of those years exceeding 36%.
I understand that’s a lot of data points and numbers to throw around, but friends, we do not often get returns like these. When we find them, it’s best to stick with them, add consistently to them and understand the long-term return.
Case in point, consider its competition: The S&P 500, the Dow Jones Industrial Average and the Russell 2000.
Over the past year, QQQ stock has generated a 49.88% return. That beats all the aforementioned competitors handedly.
And as soon the timeframe is expanded, the QQQ’s dominance really shines. Up around 80% over the past three years, it doubles the return from the next-best performer (in this case, the Russell 2000).
The further back we go, the more distance the QQQ puts behind it. Over the last five years, this ETF has generated a 200% return vs. the S&P 500’s gain of “just” 94.5% and the Russell’s gain of 109%.
Here is the 10-year return for the group:
| Fund | 10-Year Gain |
| QQQ | 442.87% |
| S&P 500 | 192.30% |
| Russell 2000 | 166.14% |
| Dow Jones | 158.39% |
The Bottom Line
QQQ is five-star rated by MorningStar, and it certainly deserves its rating.
With a gross expense ratio of just 0.2%, or $20 per $10,000 invested annually, the QQQ isn’t that expensive of a fund either. Sure, an investor could save 15 basis points and go with a dirt-cheap fund, but is it worth sacrificing all of that long-term growth for a couple bucks?
The answer is an obvious and resounding “no.”
The QQQ stock has been a category leader over the last 10 years, and while past performance does not guarantee future returns, there’s little reason to bet against this fund.
It has plenty of exposure to mega-cap tech, as well as many of the emerging stocks within tech. While there may be diminishing returns in these mega-cap plays vs. the early days, they are great businesses with excellent long-term outlooks.
The fund’s 0.55% dividend yield is now almost 100 basis points below the 10-year yield. However, a few months ago, they weren’t that far apart. Even as it is, it’s a decent little payout that can be reinvested right into our core holding.
We’re not buying the QQQ to compete with bonds, and we’re not buying it for yield. It gives instant and targeted exposure to a great group of stocks and its returns — both over the long and short term — validates that observation.
Stay long on the QQQ stock.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
