On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discussed the Invesco Nasdaq 100 ETF (QQQM B+) with Chuck Jaffe of Money Life. The pair discussed several topics related to the ETF, in order to give investors a deeper understanding of it. Chuck Jaffe: One fund, on point for today. The expert to talk about it. This is the ETF of the Week!
Welcome to the ETF of the Week, where we examine trending, new, newsworthy, unique, and intriguing exchange-traded funds with Todd Rosenbluth, who’s the head of research at VettaFi. And at VettaFi.com, you’ll find all the tools and research you need to become a savvier, smarter investor in ETFs.
Todd Rosenbluth, great to chat with you again!
Todd Rosenbluth: It’s great to be back, Chuck!
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The Invesco Nasdaq 100 ETF. QQQM.
Chuck Jaffe: QQQM, the Invesco Nasdaq 100 ETF. This is a fund that has been, well, riding the wave. It’s well thought of by everybody. Why is it the ETF of the Week now?
Todd Rosenbluth: A few reasons. So, QQQM just hit $100 billion in assets under management. It also has received new competition from iShares and from State Street that now offer slightly cheaper products. I think a lot of people are focused on the Nasdaq 100 because it added exposure to SpaceX, but actually SpaceX is quite small, and what we’ve seen is other companies outside of the traditional Mag Seven have gained traction.
Micron is now a top-five position overall. The Nasdaq 100 is performing great. This is a low-cost, liquid way of getting exposure, despite new competition.
Chuck Jaffe: At the same time, you know, we’ve been talking a lot about actively managed ETFs. This is the classic “just buy the index.” And it’s a volatile index. Again, this scores well—if you’re looking at Morningstar’s data, five stars; if you’re looking at Lipper data, it gets the highest rating in everything but preservation of capital, where it’s in the middle of the road.
And by just about every measure, it’s hard to be disappointed with this fund. How should somebody be using it? And if they don’t have this fund yet, do you want to add what amounts to a core fund to a portfolio that has other stuff in the core?
Todd Rosenbluth: So, a few things here. QQQM, for many people, has been the growth-oriented part of their core. So, you might own exposure to the S&P 500, which is a mixture of growth and value stocks. QQQM, because it excludes financials and because it’s market-cap weighted, it’s very growth-oriented. Heavy exposure to technology. More modest exposure to consumer discretionary and communication services stocks.
This is a growth portfolio of large-cap companies. What we’ve found is that people have been continuing to add exposure to it as the market has climbed higher, and even when there was hesitation about the Mag Seven, people put money into QQQM. It’s been quite popular this year, and it’s worked out.
You mentioned it’s index-based. This index-based strategy is outperforming most of the active products. In fact, as you noted, five-star rated by Morningstar, which has mostly actively managed products within their universe. It scores very well according to Lipper. Again, for the performance attributes, it’s hard to find a fund that’s actively managed that has outperformed the Nasdaq 100 over the longer term. It’s just hard to do, because the mega-cap stocks continue to climb higher.
Chuck Jaffe: There are probably not going to be many investors out there who don’t have a pretty significant weighting to technology. How do you add this to a portfolio and not be overweight that much more, because it’s the tech-heavy index, et cetera, and that is something that some people at least want to guard against right now?
Todd Rosenbluth: You’re right. So you’d have to go into QQQM or have to retain exposure to QQQM because you are confident in the growth prospects of technology and technology-adjacent stocks. So, this still does have heavy exposure to Apple and Microsoft. I mentioned Micron being a top 10 position. It also has exposure to Alphabet and Meta, which are not technically technology stocks according to the classification system, but many people think of [them as such].
You would want to own this fund if you were prepared to overweight exposure to those sectors. If you think the market is going to be more value-oriented, and you and I have talked about some value strategies in the recent past, this is not the strategy for you. It does not have any exposure to financials.
It has limited-at-best exposure to other traditional value sectors like energy or consumer staples, although I believe Walmart is within this portfolio, as is Pepsi. But you’re not going to find the same exposure that you would within the S&P 500. So you have to have confidence in the growth prospects for mega-cap stocks to own QQQM and to be adding to it.
But we think this can make a lot of sense if you believe in the second half of the year that those stocks are going to continue to climb higher, that the rally still has legs. QQQM can be a great, relatively low-cost product to get exposure.
Chuck Jaffe: Now I want to talk about somebody who I know does not necessarily believe that the rally has legs—or that’s actually a little unfair. He believes that this rally has legs for a while, but I spoke recently with Zach Johnson from Stack Financial Management. He’s one of many technical analysts whom I talked to, and he believes we’ve got a market that is building—the phrase he uses is “generational bear market,” and he talks about what could happen and when it could happen.
But what he said is a generational bear market is one where we’re going to see the S&P 500 potentially get cut in half, and the Nasdaq could be down as much as 70%. So, given that there might be that concern out there, we don’t normally ask this, but do you enter something like this with a sell discipline in mind, or a “if I’m adding this, what would be my sign of trouble?”
Because index funds are basically roller coasters, and you are strapping yourself to the ride. And we all know when you go to the amusement park, the roller coaster is the best ride. We also know people who have gotten sick when the ride got a little too violent for them.
Todd Rosenbluth: There’s going to be volatility in any equity investment. I don’t know that there’s a consensus view that the S&P 500 is going to get cut in half, and the Nasdaq 100 even more. So that sounds very bearish. This is not a strategy for someone who’s very bearish. This is a strategy for someone who is bullish on U.S. equities.
This fund, which does not have a forever track record, has an older sibling, which is the Triple Qs (QQQ), which is a slightly more expensive, slightly more liquid alternative that’s used more for institutional investors. That fund has been around since prior to 2000.
So if you want to see the track record of the Nasdaq overall during times of bear markets, I don’t have it in front of me, but I imagine it’s relatively weak. That’s what stocks do during a bear market is they fall in value.
If you believe that the market can climb higher, QQQM is a great way to get exposure. It’s diversified somewhat across the largest growth-oriented stocks in the United States. It has outperformed over the longer term, even with some volatility included. This fund was around in ‘22, and you can see how it performed during that time period, and then very quickly bounced back to where you’d want to be a part of it.
Chuck Jaffe: You mentioned some new competitors for QQQM and that they are cheaper. Cheaper does make a difference on index funds, as we’ve said before, and I’m sure you will say again, it’s not enough of a difference for you to say, “Oh, if you’ve got this one, sell it and buy the one that is cheaper.” But is it for somebody who’s not?
Who’s looking at this fund—and obviously, this is the ETF of the Week—does it make a difference to buy the one that’s established, even though the other firms are big, and you wouldn’t really worry that they’re going to somehow, you know, start a fund that gets a false start or anything? How do you deal with that?
Todd Rosenbluth: You’re right. So I expect that iShares, which launched a Nasdaq 100 product, and State Street Investment Management, which did a few weeks ago—both of those products are going to survive. You’re right, they have a lower expense ratio today. It wouldn’t surprise me if QQQM’s expense ratio trended lower, because it’s the more retail-oriented product to get exposure to the Nasdaq 100 from Invesco, but it is a total cost.
And so right now, QQQM has a lot of liquidity behind it. It trades with a tight bid-ask spread. And for many people, in fact, with $100 billion worth of investment, to sell such a strategy to buy a cheaper alternative just would not make sense. It would be cost-prohibitive.
So, I think if you own QQQM, you should be very happy. You should consider adding more exposure to it. And if you don’t own it, this could be the vehicle to get exposure because its total cost is quite compelling.
Chuck Jaffe: Yeah. And we should point out, it’s 15 basis points is the net expense ratio. So even though you could say somebody else is cheaper, nobody’s a lot cheaper, because it’s way down there.
It’s the QQQM, the Invesco Nasdaq 100 ETF, the ETF of the Week from Todd Rosenbluth. Todd, great stuff. We’ll see you again next week!
Todd Rosenbluth: Thanks a lot, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yes, I’m Chuck Jaffe. You can follow my hour-long weekday show by going to MoneyLifeShow.com , or by searching for it where you find your favorite podcasts.
Now, if you’re searching for more information on your favorite ETFs, look no further than VettaFi.com, where they’ve got the tools that will help you become a better investor and to know your funds better. They’re on X @Vetta_Fi, and Todd Rosenbluth, their Head of Research, my guest—well, he’s there, too. He’s @ToddRosenbluth.
The ETF of the Week is here for you every Thursday. Follow us on your favorite podcast app to make sure you don’t miss an episode, and we’ll introduce you to another interesting ETF next week. Until then, happy investing, everybody!
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Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
