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