The Invesco QQQ(NASDAQ: QQQ) has been one of the best-performing index-based exchange-traded funds (ETFs) over the years. The ETF tracks the popular Nasdaq-100 index, which consists of the 100 largest stocks that trade on the Nasdaq stock exchange.
The Invesco QQQ proudly boasts that it has outperformed the S&P 500 by more than 400 percentage points since its launch in 1999, but is that enough for the ETF to be a millionaire maker? Let's find out.
Technology focused
An investment in the Invesco QQQ is largely an investment in the technology sector. Approximately 60% of the ETF's holdings are classified as being technology stocks. That's not a bad thing, as technology companies have been leading the way in the market for the past few decades.
In fact, many of the largest companies in the world are now technology or certainly tech-adjacent companies. Within the S&P 500, which comprises the 500 largest companies traded in the U.S., eight of its top 10 holdings would fit in this category. Technology is changing the world we live in, and technology companies have grown to become the biggest companies in the world as a result.
Meanwhile, we appear to be in the early innings of the next big technology trend with artificial intelligence (AI). Generative AI, which can create content based on user questions or prompts, is just getting started and entering our lives. This can be seen in things like asking ChatGPT a question to get an answer; using Alphabet's Veo 2 to create a video using just text; or using Microsoft's 365 copilots help you more quickly complete tasks at work. In addition, companies are already beginning to introduce the next wave of AI with agentic AI, where AI agents can go out and autonomously complete takes under the parameters given with little human involvement needed.
The Invesco QQQ is a great way to invest in many of the top companies riding these trends. Its top holdings are very weighted toward companies that are starting to benefit from AI. This includes Apple (9.4% weighting), Nvidia (8.8%), Microsoft (8.1%), Amazon (6%), Alphabet (5.7%), Broadcom (4.5%), Tesla (3.7%), and Meta Platforms (3.4%). Costco is its largest non-tech holding, with a 2.6% weighting.
This emphasis on large tech stocks have led to outsized returns over the years. Over the past decade, the QQQ ETF has generated a cumulative return of 435.9%, easily outpacing the S&P 500's (SNPINDEX: ^GSPC) 242.5% return over the same period. That equates to an average annual return of 18.3% for the ETF over that period. The past five years have been even better, with an average annual return of 19.9%, compared to 14.5% for the S&P 500.
This outperformance also hasn't just come from one or two large outlier years of outsized performance. According to Invesco, the QQQ ETF has outperformed the S&P 500 87% of the time over the past decade, based on rolling monthly periods.
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Is the Invesco QQQ ETF a millionaire maker?
Even with its stellar returns the past decade, the QQQ ETF won't turn a small investment into $1 million in a decade. A $10,000 investment a decade ago would be worth $53,591 today (as of the end of 2024).
The key to the QQQ ETF helping investors become millionaires is consistent investing through the use of a dollar-cost averaging strategy. This is investing in the ETF at regular intervals regardless of price and allows investors to ride the market when it's going higher and to load up on more shares when the market is down. Over the long run, this is a proven strategy to help accumulate wealth.
If you were to make just a $10,000 initial investment and invest an additional $1,000 at the end of each month over the next 20 years, that investment would be worth approximately $1 million with a 12% average annual return. Meanwhile, approximately 75% of that would come from market gains. Note that actual returns would vary based on market fluctuations over that period, but this gives you a good sense of the time frame needed.
All in all, the Invesco QQQ ETF has a long proven track record of outperformance, making it a great investment option, albeit one that is admittedly more on the aggressive side, given its large weighting toward tech stocks. With the ETF pulling back a bit from its recent highs, now could be a great time to start investing for the long term.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet and Invesco QQQ Trust. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
