Most leveraged ETFs are risky due to compounding and reset mechanics, often misleadingly backtested, and unsuitable for long-term investors. However, investors should consider that beta can often act as a form of leverage. In this way, the NASDAQ 100, QQQM, is almost like a levered S&P 500. In backtests, we can see that holding 60% QQQM and 40% cash amounts to roughly the same annualized return, with lower volatility, than holding the S&P 500 outright.
This article walks readers through how QQQM and QQQ, two Nasdaq-100 Index ETFs, compare fundamentally against nine of the largest large-cap growth alternatives by assets under management. It argues that Nasdaq-100 Index ETFs are not optimal for large-cap growth investors when considering diversification, growth, value, risk, quality, and momentum. Furthermore, investors relying on ten-year performance charts may be misled by the Index's special rebalancing from two years ago, which significantly reduced allocations to NVDA and MSFT.
The Invesco Nasdaq 100 ETF offers exposure to leading tech companies like NVDA, MSFT, and AAPL, driving innovation in AI and computing. QQQM stands out among peer funds with its low expense ratio, competitive yield, and strong long-term growth prospects from its concentrated top holdings. Risks include high concentration in large-cap tech and potential volatility, but these are offset by the fund's focus on industry leaders.
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This fund is primarily focused on investing in securities that are part of its underlying index, which is compiled, maintained, and calculated by Nasdaq, Inc. The index features 100 of the largest domestic and international nonfinancial companies listed on The Nasdaq Stock Market LLC, based on market capitalization. The fund commits to investing at least 90% of its assets in the securities making up the index. It operates with a non-diversified investment strategy, which means it may allocate a larger portion of its assets to fewer securities than a diversified fund.
The primary service offered involves investing in securities that are part of a specific underlying index. The fund aims to replicate the performance of these securities, which represent 100 of the largest domestic and international nonfinancial companies listed on The Nasdaq Stock Market LLC, emphasizing market capitalization.
This fund adopts a non-diversified strategy, focusing its investments in a narrower selection of securities. This approach allows for the potential of higher returns from individual investments but comes with a higher risk due to less diversification.