Why QQQ is Rarely the Best Choice for Investors: Better ETF Options to Consider

Despite its popularity, the Invesco QQQ Trust ETF (QQQ) is very rarely the best choice for any investor. While the fund tracks the performance of the Nasdaq-100, which consists of the largest nonfinancial companies listed on the Nasdaq Stock Exchange, there are several better opportunities in the market for investors looking to diversify their portfolios and potentially outperform the standard index.

One alternative to consider is the Invesco Nasdaq 100 ETF (QQQM), which was launched in 2020 as a sister ETF to QQQ. Despite using the same criteria and trading rules as its older sibling, QQQM charges 5 fewer basis points to investors with an expense ratio of 0.15% compared to QQQ’s 0.2% fee. This makes it a more cost-effective option for small, individual buy-and-hold investors who are not planning on frequent trading.

For investors looking to avoid an overconcentrated portfolio, the Invesco S&P 500 Equal Weight ETF (RSP) may be a better choice. Unlike the Nasdaq-100, which is heavily weighted towards tech stocks, the equal-weight index spreads the portfolio evenly across every constituent of the index. This can provide more exposure to a diversified portfolio and potentially outperform the standard index, as smaller companies historically have better returns over the long run.

Another option to consider is investing in a small-cap value ETF, such as the Avantis U.S. Small Cap Value ETF (AVUV). Historically, small-cap and value stocks have outperformed in the long run, and the current valuation gap between large-cap growth stocks and small-cap value stocks suggests there may be more upside potential for the latter. Factors such as reversion to the mean and potential interest rate changes could lead to strong performance among small-cap value stocks in the future.

Overall, while the Invesco QQQ Trust ETF has a strong track record, there are several better opportunities for investors to consider before adding QQQ to their portfolios. By exploring alternative ETFs that offer lower fees, more diversification, and potential for outperformance, investors can make more informed decisions about their investment strategies in the current market environment.