Since the last update on our reader’s choice for the best ETFs of 2020, the Invesco QQQ Trust (NASDAQ:QQQ) climbed more than 15%. As of this writing, it has managed to reach a 31% year-to-date gain.
Although this is an impressive leap, especially considering that in the first quarter it was down 16% (largely due to the novel coronavirus pandemic), it hasn’t all been smooth sailing. If you look at its performance in just the last month, you’ll notice that it has shed nearly 6%.
What Happened to QQQ?
Broadly speaking, the QQQ ETF is an exchange-traded fund that holds the 100 largest non-financial companies within the Nasdaq. While it isn’t a direct tech stocks ETF, the fact that its top holdings are companies like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) means that it’s often looped into that category. It’s a large part of the fund’s appeal, and it’s also a large part of its overall success.
However, more recently, many of its tech holdings have suffered. This came mainly from a general selloff in tech halfway though September. During this period, many tech titans tumbled. And not all of them have managed to recover from the fall.
In fact, AAPL, MSFT and AMZN (all within the QQQ ETF’s top 10 holdings) are all still in the red when looking at their one-month performance. This is not to say that there’s no hope of a recovery, but rather to offer an explanation for why the ride in the QQQ hasn’t been as smooth as you might expect.
There’s still plenty of speculation going around as to the cause of this dip in tech. Many think it’s nothing to worry about, while other analysts see it as a warning sign of something more ominous ahead. From my view, it’s largely a toss up, so whether or not you should invest in the QQQ largely depends on your outlook for the rest of 2020 and beyond.
If analysts like InvestorPlace’s Luke Lango are right, the dip in tech is a strong buying opportunity, and by extension, QQQ is bound to recover quicker than you think. But if bearish analyses prove right and the election and continued economic strife domestically and internationally continue to take a toll, then the pain might just be getting started.
Is QQQ Still Among the Best ETFs in 2020?
From an overall performance stand point, QQQ remains one of the more solid ETFs on the market. It’s currently in the No. 4 spot in our contest and far ahead of more troubled names like the U.S. Global Jets ETF (NYSEARCA:JETS), which is still down 45% YTD.
On the other hand, the No. 1 pick, the Renaissance IPO ETF (NYSEARCA:IPO), is up a massive 68% YTD (more than twice QQQ’s performance so far). I don’t think QQQ has that much room to run, even if the dip in tech stocks is temporary and its holdings are due for a comeback soon.
But just because it doesn’t win the best ETFs contest doesn’t mean you should write off its value as an investment. In the long term, the QQQ ETF still seems like a solid pick for investors interested in holding some of the largest tech companies on the planet.
Other top QQQ holdings, like Nvidia (NASDAQ:NVDA) are bound to be leaders with the rise of 5G and all the technological innovations it enables. That means even if tech stocks are due for extended pain, they should still be durable enough to climb higher once these catalysts start to come to fruition.
On the date of publication, Robert Waldo did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Robert Waldo has been a web editor for InvestorPlace.com since 2016.