The Invesco QQQ Trust (QQQ ) has a history of topping other broad market exchange traded funds and index funds. If the technology sector cooperates, QQQ can live up to its growing reputation in 2021.
QQQ tracks the widely followed Nasdaq-100 Index (NDX), which is dominated by the technology, communication services, and consumer discretionary sectors. Those exposures are meaningful in the current market environment.
“The Nasdaq-100 and S&P 500 are two of the most popular equity indexes in the US. The Nasdaq-100 is heavily allocated towards top performing industries such as Technology, Consumer Services, and Health Care, which have helped the Nasdaq-100 outperform the S&P 500 by a wide margin between Dec. 31, 2007 and December. 31, 2020,” according to Nasdaq Global Indexes.
In 10 of those 12 years, the Nasdaq-100 beat the S&P 500, in some cases by significant margins.
Nasdaq and QQQ Are Ready for More Out-Performance
The world is changing faster than ever before. Entire industries are being reshaped, and new industries are being created.
Many QQQ components are using technology to disrupt the industries they are in. These companies use innovation and technology to create competitive advantages across multiple sectors and industries beyond tech. The coronavirus pandemic also highlights opportunities with tech stocks and QQQ.
While QQQ is a growth ETF, its volatility metrics compare favorably with those of S&P 500-tracking ETFs.
“One year rolling volatility (calculated by taking the standard deviation of daily returns, annualized) was 94% correlated between Dec. 31, 2007 and December 31, 2020, when comparing the two indexes. Given the large exposure the Nasdaq-100 has towards Technology, the ability for the Nasdaq-100 to closely track the volatility of the S&P 500 is rather impressive,” notes Nasdaq.
QQQ’s tech and growth exposure are meaningful for long-term investors.
“The Nasdaq-100 and S&P 500 are two of the most popular equity indexes in the US. We provided performance and volatility analysis for almost 12 years. The Nasdaq-100 is heavily allocated towards top performing industries such as Technology, Consumer Services, and Health Care. The growth of companies in these industries has continued to be strong. Given the way technology is influencing the world and making companies more efficient, this trend is more than likely to continue going forward,” concludes Nasdaq.
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