ETFs
The Smartest Tech ETF to Buy with $500 Right Now
Choosing individual stocks to add to your portfolio can sometimes be a daunting task, especially when there are thousands to choose from in the market. Even when you have chosen a specific sector or industry, picking stocks within them can be tedious.
Fortunately, you don’t need to spend time researching and selecting individual stocks; you could invest in an exchange-traded fund (ETFs) which provides broad exposure to the sector or industry that interests you. The technology sector has often been the most popular – and most rewarding – part of the stock market for investors over the past two decades.
If you have $500 to invest (meaning you have an emergency fund saved and high-interest debt paid off) and want exposure to some of the world’s biggest stocks. technology companiesTHE Invesco QQQ Trust ETF (NASDAQ: QQQ) is a great option.
A full-fledged technology ETF
The Invesco QQQ Trust ETF mirrors the Nasdaq-100, an index that tracks the 100 largest non-financial companies listed on the Nasdaq exchange. While not a purely technology ETF, the technology sector makes up about 59% of the fund and includes many of the world’s most valuable technology companies.
Here are the ETF’s top 10 holdings, including the “Magnificent Seven” (as of March 31).
The ETF is in a good position — not as large as the Nasdaq Composite Index (which contains over 3,000 companies), but broad enough to cover virtually every area of the tech industry. Its technology companies are involved in software, semiconductors, cloud computing, artificial intelligence and dozens of other sectors poised to drive growth.
A low-cost way to get exposure to the biggest tech companies
The ETF’s expense ratio is 0.20%, which equates to $1 per year per $500 invested. It’s not as cheap as some popular S&P 500 ETFs, which might have expense ratios as low as 0.03%, but it’s still a less expensive option than many other comparable ETFs.
An ETF’s expense ratio may seem like a small detail that can be overlooked, but the smallest differences on paper can equate to a decent amount of money in real life.
For example, imagine you invest $500 per month in two ETFs that generate an average annual return of 10% over 20 years. Below is the difference in your total investments between 0.20% and 0.40% expense ratios:
|
0.20% |
$7,700 |
$335,900 |
|
0.40% |
$15,200 |
$328,400 |
Calculations by author. Figures rounded to the nearest hundred.
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Even a slight difference of 0.20% equated to thousands in extra fees paid over time. Don’t overlook ETF expense ratios; they are counting.
The ETF has a history of outperforming the market
The ETF is up nearly 1,000% since its inception in March 1999, with most of those gains occurring over the past decade. During this period, it has significantly outperformed the Nasdaq Composite and the S&P 500. A $500 investment at its inception would be worth almost $5,500 today.
QQQ Total Return Levels Chart
An ETF returning nearly 19% in a single year is impressive on its own, but a decade-long average speaks to the consistency and resilience of companies leading the way.
Past results are no guarantee of future performance, but for illustration purposes, let’s assume the ETF averages more modest annual returns of 15% over the next decade. A $500 investment could now be worth almost $2,000 after fees.
You should never invest in a stock assuming you can predict its performance, because you can’t. It’s like counting your chickens before they hatch, and it’s one of the easiest ways to set yourself up for disappointment. However, history can give you insight into a stock’s ability, and this ETF has shown that it can generate consistent returns and capitalize on the growth of the technology sector.
Should you invest $1,000 in Invesco QQQ Trust right now?
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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, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Steve Walters holds positions at Apple and Microsoft. The Motley Fool holds positions 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.
The Smartest Tech ETF to Buy with $500 Right Now was originally published by The Motley Fool