One of Wall Street’s favorite investment vehicles turns 25 years old

One of Wall Street’s favorite investment vehicles turns 25 years old on Sunday, but shows no signs of fading to the background as it ages. The Invesco QQQ Trust , which tracks the Nasdaq-100 Index and is often referred to by its ticker QQQ or simply as “the Qs,” has become shorthand for growth stock investing since its launch on March 10, 1999. The fund now has about $250 billion in assets under management, making it the fifth biggest ETF in the United States, with about $7 billion in new inflows so far this year, according to FactSet. It is reaching its silver anniversary on a high note. The fund set a record high on March 1 and closed within 2% of that mark on Friday. It has continued to churn higher even after soaring nearly 55% in 2023. One of the main conversation points around the 2023 rally for the QQQ, and the entire U.S. market, is the dominance of just a handful of key stocks. Historical data, however, shows similar to other big years, when just four or five stocks accounted for roughly 20% or more of the the index’s performance. One note though: some of those big years came right before major reversals. “I found that each one kind of looks and feels a little bit different,” Ryan McCormack, core equity strategist representing Invesco’s exchange-traded funds, said of the QQQ’s best years. “In general, I think any time you see these good years, it’s going to be driven by the names that you have heavier weights to, or heavier over-weights relative to whatever index you’re trying to compare it to,” McCormack added. Change over time Looking at the historical rallies reveals that the most important stocks often change from one market cycle to the next. Microsoft , for example, was the only top 10 contributor in both the 1999 and 2023 rallies. Chip stocks Intel and Qualcomm were key in 1999, but were overshadowed by competitors Nvidia and Broadcom last year. The individual components of the fund also change over time, following the tweaks to the Nasdaq-100. Just last year, the index added 10 new stocks and did its third ever special rebalance, according to Nasdaq. Over the years, many key stocks have left the fund, including former top performers like Nextel Communications and Sun Microsystems, which were bought out. And in the past 25 years, many of the biggest names in the fund have gone from relative upstarts to the most recognizable — and cash rich — companies in the world. “The Qs have become more ingrained, not just in portfolios, but in our lives. You’re using Apple devices, you’re using Amazon and Meta ,” said Todd Sohn, ETF strategist at Strategas. Though often associated with technology, the QQQ also includes giant corporations in other industries, such as Pepsico and Amgen . And some of the big tech stocks have changed enough over time that they are now in categories other than tech according to some classification systems. “The companies have been very nimble. They look really, really different,” from what the index once was, McCormack said. Related plays Competition in the ETF industry for the QQQ has expanded dramatically over the past quarter century, including from other Invesco funds. The firm offers several funds that are similar to QQQ, and may actually be a better choice for some investors. For example, the Invesco Nasdaq 100 ETF (QQQM) comes with a lower management fee than its predecessor, and also has the ability to reinvest dividends, which can improve performance. “In plain English, it should track the index even closer because it has a lower cash balance,” McCormack said. That fund is less than four years old but has already surpassed $20 billion in total assets.