The S&P 500 (^GSPC -0.29%) is the most closely followed benchmark to gauge the performance of the overall stock market. In the past decade, it has produced a total return of nearly 254%. But there's one monster exchange-traded fund (ETF) that has crushed this gain. If you invested $10,000 in it exactly 10 years ago, that figure would be worth an impressive $55,300 today. This translates to a fantastic 453% total return (as of Jan. 23).
Even after that type of performance, is it smart to buy this ETF in 2025?
Fantastic track record
If you're not already, you need to get familiar with the Invesco QQQ Trust (QQQ -0.56%). This ETF tracks the performance of the Nasdaq-100 index, which contains the 100 largest non-financial companies that trade on the Nasdaq Composite exchange. It provides more specialized exposure to the economy.
The QQQ has generated such a great return because it has high concentration in the technology and consumer discretionary sectors. These industries benefit from powerful secular tailwinds, like cloud computing, digital advertising, digital payments, e-commerce, and streaming entertainment, for example. That leads to durable growth.
Data by YCharts.
It shouldn't be surprising that the "Magnificent Seven" shines bright in the QQQ. These seven dominant businesses in total represent 44% of the ETF's asset base. It's clear that the portfolio's performance is heavily tied to these businesses and how they fare.
Nonetheless, the fact that technology continues to be such an important part of our economy, particularly as it relates to consumer behavior, means that it might make sense for investors to put money into the QQQ.
QQQ benefits
Besides performance, which is obviously what most investors pay attention to, there are other benefits to owning the Invesco QQQ Trust. One area to keep in mind is the fee structure. The expense ratio is just 0.2%, which means out of every $10,000 invested, only $20 goes to fees each year. This means you get to keep more of your money over time, clearly a winning result.
That fee looks even more compelling when compared to a prominent investment product, the Ark Innovation ETF (ARKK -0.57%). Headed up by famed investor Cathie Wood, this ETF invests in some of the most innovative and disruptive businesses benefiting from broad secular trends, not unlike the QQQ.
However, the Ark Innovation ETF charges an expense ratio of 0.75%, almost 4 times that of the QQQ. This is despite much worse performance. In the past decade, the Ark Innovation ETF has produced a total return of just over half that of the QQQ. Investors have been paying up for subpar gains.
Data by YCharts.
The low maintenance of the QQQ is also hard to overstate. Owning this investment product means investors don't need to pick single winners behind certain tech trends. There's no need to have top-notch financial analysis skills, either. This saves a lot of time.
Long-term mentality is key
The QQQ is currently trading in record territory. Hesitant investors are right to wonder if now is still a good time to put money to work. While anything can happen in the near term, I believe owning this ETF for the long haul makes a lot of sense. Practicing patience will increase the chances of a favorable outcome.
To be clear, forward returns might not resemble the past, which has seen tremendous gains. But a dollar-cost-average strategy into the QQQ for part of a diversified portfolio seems like a smart move in 2025. This action will provide growth potential and exposure to some of the world's dominant enterprises, a winning bet in the past.
