The Smartest Nasdaq Change-Traded Fund (ETF) to Purchase With $2,000 Proper Now

The Nasdaq Composite is among the U.S. inventory market’s three main indexes, monitoring virtually each inventory on the Nasdaq inventory change.

The Nasdaq-100 is a subset of the Nasdaq Composite that tracks the most important 100 nonfinancial firms on the Nasdaq inventory change, and investing in it is among the extra in style methods to spend money on the Nasdaq. It is way more concentrated than the Nasdaq Composite, however that has labored out in its favor.

When you’ve got $2,000 obtainable to take a position (which means an emergency fund saved and high-interest debt paid down), the Invesco QQQ Belief (QQQ 0.42%) is a good ETF to contemplate if you wish to spend money on the Nasdaq.

Picture supply: Getty Photos.

Massive tech is main the way in which for the ETF

Though this ETF incorporates 101 shares, the highest 10 holdings do plenty of the heavy lifting, making up virtually 50% of the fund’s worth. Under are its high holdings and the way a lot of the ETF they make up:

Supply: Invesco. Percentages as of Feb. 11.

Having 10 shares account for over half of an ETF’s holdings does not fairly scream diversification, however it’s true for a lot of market-cap-weighted ETFs due to skyrocketing huge tech valuations.

The unhealthy information is that the efficiency of those firms will closely affect the ETF’s success (or lack thereof). The excellent news is that these firms have been a number of the top-performing shares over the previous decade. On this case, the worst-performing inventory of the bunch at the moment is Alphabet’s class C inventory, and it is up over 570%. Not too shabby.

Massive tech has been off to a shaky begin in 2025, however that should not be an indictment of its long-term progress potential. Many valuations have admittedly been inflated due to hype fueled by synthetic intelligence (AI), however a handful of industries are nonetheless on the early facet of what they may (and may) turn out to be.

With cloud computing, cybersecurity, AI-driven productiveness, and semiconductors, the runway for these high holdings is way from over. The secret’s to remain centered on the long run and turn out to be reactive to short-term happenings out there.

This ETF has a historical past of outperforming the S&P 500

The S&P 500 — which tracks the five hundred largest U.S. firms available on the market — is crucial index on the U.S. inventory market, and it is truthfully not even shut.

Most shares and ETFs evaluate their efficiency in opposition to the S&P 500’s to find out whether or not they’re overperforming or underperforming. On this ETF’s case, it is the previous.

QQQ Complete Return Degree knowledge by YCharts.

How might a $2,000 play out for buyers?

To offer you an concept of how profitable the ETF might be, let’s examine how a $2,000 funding 20 years in the past would fare as we speak.

QQQ knowledge by YCharts.

Now, previous outcomes do not assure future efficiency, and there isn’t any solution to know the way the ETF will carry out, however you may see how resilient the ETF might be in the long term — which is what you ought to be specializing in.

Even when we assume the ETF grows a extra modest 10% yearly, a $2,000 funding as we speak could possibly be value near $5,100 in 10 years and near $13,000 in 20 years (accounting for the ETF’s 0.20% expense ratio).

When you’ve got reservations about investing the complete $2,000 directly, you may take the dollar-cost-averaging strategy and break down your investments into smaller installments. You could possibly make two $1,000 investments, 4 $500 investments, 5 $400 investments, or no matter you might be most snug with.

Utilizing dollar-cost averaging might assist defend you in opposition to sudden drops out there and cut back the impression of volatility.