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Best ETFs for 2020: Former Champion Invesco QQQ Trust Returns

Editor’s Note: This article has been updated to reflect the change in the QQQ ETF’s name.

This article is a part of InvestorPlace.com’s Best ETFs for 2020 contest. The reader’s choice for the contest is the Invesco QQQ Trust (NASDAQ:QQQ).

Best ETFs for 2020: Former Champion Invesco QQQ Trust Returns

Last year, InvestorPlace.com readers believed the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM) would win the Best ETFs contest for 2019. Although the probable reason for why our readers chose this exchange-traded fund to win the contest — hope that stocks in emerging markets like China would make a comeback — was sound, the trade war between the U.S. and China made it a lackluster performer throughout the year.

Now, instead of taking a bet on outside markets, our readers have returned to their pick (and overall winner) for 2018’s ETF contest: the Invesco QQQ Trust (NASDAQ:QQQ).

The QQQ ETF is still inherently affected by the trade war to some extent — it tracks the Nasdaq 100, which includes many big-name tech stocks like Apple (NASDAQ:AAPL). However, its overall allocation of holdings is diverse enough that it isn’t as risky as an ETF like EEM.

In fact, while EEM has only managed to gain 12% so far this year, QQQ has gained 33% year to date. Consider that the YTD gains for the S&P 500 are just 27%.

Heavy Emphasis on Tech With QQQ ETF

The mindset of our readers is made clearer when you consider their No. 2 and 3 picks for the 2020 contest. Specifically, our readers were also considering the Technology Select Sector SPDR Fund (NYSEARCA:XLK) and iShares S&P Semiconductor Fund (NASDAQ:SOXX) as top contenders.

Clearly, InvestorPlace.com readers have a high degree of faith in the outlook of tech stocks. The optimism is well-justified given that these companies are packed full of potential catalysts. Their innovations — both current and future — will help shape our world in the years ahead. Many of its holdings are a part of the movement toward the “Internet of Things,” autonomous vehicles, 5G, artificial intelligence and high-tech innovations in healthcare.

According to the QQQ investor page, it’s the “2nd most traded ETF in the US based on average daily volume traded.” And there’s a good reason why it’s considered one the best ETFs.

Although 45.7% of its holdings are in the information technology sector (think Microsoft (NASDAQ:MSFT), PayPal (NASDAQ:PYPL) and Adobe (NASDAQ:ADBE)), it also has a significant emphasis in the communications (21.4%), consumer discretionary (15.9%) and healthcare (7.4%) sectors. This makes it much “[m]ore than just a tech fund.”

Its diversity means that it holds other top-tier companies like Facebook (NASDAQ:FB), Activision Blizzard (NASDAQ:ATVI), Amazon (NASDAQ:AMZN) and Amgen (NASDAQ:AMGN).

But even so, there are several risks to consider before betting the house on QQQ.

Some of these risks include (but are not limited to) the following:

  • The trade war is still unresolved and can still influence its top holdings like Apple.
  • The U.S. 2020 Presidential election may influence investors’ outlook on some QQQ holdings depending on which candidates endure.
  • Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is facing an anti-trust investigation.

Bottom Line on the QQQ

Ultimately, our reader’s choice of the QQQ ETF is a reflection of the broader market’s continued enthusiasm as we head into the New Year.

Although we started 2019 in the trenches after a massive selloff in December 2018, the market has since recovered and concerns of a looming rescission have subsided … for now. Consider that concerns surrounding the trade war are also diminishing with an anticipated “global economic recovery … into 2020.”

With all of that, many experts expect 2020 to be another strong year for stocks. If that ends up being true, then QQQ will undoubtedly be a top performer for the year and perhaps the best ETF in the 2020 contest like it was in 2018.

Robert Waldo is a web editor for InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2019/12/best-etfs-for-2020-former-champion-powershares-qqq-trust-returns/.

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