Major equity gauges, including the Nasdaq Composite and the S&P 500, continue notching record highs nearly daily. Up more than 11% over the past 90 days, the Nasdaq-100 Index (NDX) is participating in that bullish trend.
That’s good news for investors holding ETFs like the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ). Both follow the NDX. On the other hand, some market participants are concerned about allocating capital to assets at or near all-time highs. That’s a valid line of thinking. But it’s also a risky one. That’s because QQQ and QQQM have recently proven that simply because a stock or an ETF notches an all-time high doesn’t mean fresh records aren’t on the way.
Translation: Investors fretting about buying QQQ or QQQM today because the ETFs have recently run up and are flirting with records could be making a counterintuitive move that exposes them to missing out on being involved when the next highs are reached.
Stay Invested With QQQ/QQQM
Market timing is a difficult task and arguably a waste of time for many investors. Yet that’s exactly what market participants are engaging in when they wait for securities, including QQQ and QQQM, to retreat from record highs.
“Despite popular perceptions, history shows that buying at local highs does little to affect subsequent one-, three- and five-year outcomes,” according to BlackRock. “In fact, ‘new highs’ are a regular feature of the market, with the S&P 500 Index making an average of 18 new highs per year since its inception in 1957.”
Another reason investors shouldn’t fret about the recent series of QQQ/QQQM records and consider remaining engaged with the funds is the durability of quality investing. Many of the Invesco ETFs’ holdings, including the funds’ biggest names, fit the bill as quality stocks. That’s an important point because the quality factor performs well over time. And it makes it easier to get involved when such stocks are hitting all-time highs.
“A history of earnings stability is a hallmark of a quality company, in our view, and a prudent investment approach amid mixed macro signals,” added BlackRock. “Quality companies generally have strong free cash flow, solid balance sheets and the brand strength and pricing power to maintain, or even grow, their market share relative to competitors in the case of an economic slowdown.”
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