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QQQJ, QQQM - >>> How To Buy All The Nasdaq's Top Stocks For 25% Off


Investors Business Daily

by MATT KRANTZ

10/15/2020


https://www.investors.com/etfs-and-funds/etfs/top-stocks-how-buy-all-nasdaq-qqq-25-less/?src=A00220


QQQ stock (QQQ) is a popular ETF for good reason: You can own 100 of the Nasdaq's top stocks in one trade. But now, you have another way to do it — for less.

Investors can now own all the same stocks on the Nasdaq 100 at a much lower fee with a new ETF. It's the Invesco Nasdaq 100 ETF (QQQM). Like the Invesco QQQ Trust, it owns all 100 of the largest non-financial companies on the Nasdaq. But it does it for 0.15% a year, or 25% less than the 0.2% the QQQ charges.

Plus, there's another new ETF that lets you own Nasdaq up-and-comers even before they crack the 100. The Invesco Nasdaq Next Gen 100 ETF (QQQJ) owns the next 100 largest non-financial companies following the 100 largest in the QQQ. This ETF opens mid-sized companies to your portfolio.

"QQQ is likely to remain among the 10 largest ETFs in the near term given its liquidity and the strong affinity growth investors have gained over the past decade," said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. "However, we expect some investors to find the lower-cost QQQM alternative and more moderately sized companies inside QQQJ to be appealing."

Top Stocks Make QQQ A Raging Success

It's easy to see why Invesco (IVZ) wants to extend and protect its QQQ stock franchise. It's one of the greatest success stories for investors.

Shares of QQQ — powered by outsize holdings in stocks like Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN) and Alphabet (GOOGL), skyrocketed more than 175% in the past five years. That's more than double the S&P 500's 5-year 75% rise.

And QQQ stock did even better during the Covid-19 pandemic. Mega-cap technology stocks, which dominate the QQQ, are pulling ahead in both stock price and profit. Just this year, QQQ stock is up more than 35%, while the S&P 500 has risen just 7.8%.

Keep in mind, too, Tesla (TSLA) is 3.4% of the Nasdaq 100. But this leading electric car maker worth $430 billion isn't even in the S&P 500 yet. That hurts if you consider Tesla stock is up more than 400% this year. No wonder it's millennials' favorite stock.

Strong performance begets money flows. QQQ stock reached $137 billion in assets in September, a six-fold increase in 10 years, Rosenbluth says. It's now the fifth largest ETF and narrowing the gap with the largest ETF, SPDR S&P 500 ETF (SPY), with roughly $300 billion in assets.

Owning The QQQ For Less

Moving money from QQQ stock to the new QQQM is a no-brainer for many individual investors. Nasdaq 100 stocks are leaders.

The Nasdaq 100 is heavy on top stocks in technology, with the sector holding 48.1% of the portfolio. And that heavy concentration has been a boon as tech stalwarts dominate. Apple accounts for 13.3% of the Nasdaq 100 and Microsoft 10.8%.

But communication services is close behind at 19.1%. Facebook (FB) is the big player there making up 4.3% of the Nasdaq. And the 18.9% weight in consumer discretionary is mostly due to Amazon.com's 11% weighting.

QQQ stock is a better choice than QQQM for large investors making million-dollar trades. QQQ moves more than 60 million shares daily on average.

But investors should go with the "cheaper version ... unless you need institutional liquidity," said Dave Nadig, chief investment officer at ETF Flows. If you invest $50,000 in QQQM instead of QQQ, you'll save 5 basis points or $25 in just the first year. "I wouldn't expect the liquidity (of QQQM) to ever match the (QQQ), but most of us don't need to execute millions of dollars in seconds," Nadig said.

Going Broader With Top Stocks Than The Nasdaq 100

Giant technology stocks are hijacking the Nasdaq 100 and driving more of its profits. But smaller companies are on the rise.

The QQQJ owns the No. 101 to No. 200 most valuable Nasdaq stocks. This fills in some smaller companies like Dunkin' Brands (DNKN), F5 Networks (FFIV) and Okta (OKTA), Rosenbluth says. Technology is weighted slightly lower in QQQJ than the QQQ at 46%. Health care, though, is No. 2 at 19.4%.

Investors can use the new ETF to easily own "the next generation of innovative companies ... before they graduate to the Nasdaq 100," said John Hoffman, Invesco's Head of Americas, ETFs & Indexed Strategies. Since 2011, 54 companies graduated from the Nasdaq Next Generation Index to the Nasdaq 100, he says. That include companies such as Tesla, Netflix (NFLX) and DocuSign (DOCU).

"Given the success of the (Nasdaq) 100, it seems totally reasonable to have some (capitalization) spectrum versions," Nadig said. "Do I expect it to pull in billions instantly? No. But do I expect a certain class of investors to be excited by the next 100 stocks related to the Qs? Absolutely."

Rise Of The QQQ

The Invesco QQQ Nasdaq 100 ETF is the top performer among the fastest-growing funds

ETF Symbol 1-Year Price % Ch. 1-Year Flows ($ Billions) Assets ($ Billions)

Invesco QQQ Trust (QQQ) 52.8% $18 $137

SPDR Gold Trust (GLD) 26.8% 20 79

Vanguard Total Stock Market (VTI) 18.2% 23 170

Vanguard S&P 500 (VOO) 17.6% 25 166

iShares iBoxx $ Investment Grade Corporate Bond (LQD) 6.9% 17 56

Sources: CFRA's First Bridge, S&P Global Market Intelligence; Assets through Oct. 9 and stock change through Oct. 14

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