Key Morningstar Metrics for Invesco QQQ
- : NeutralMorningstar Medalist Rating
- : Below AverageProcess Pillar
- : Above AveragePeople Pillar
- : AverageParent Pillar
The Nasdaq-100 Index’s tremendous returns obscure key flaws in its construction and cast doubt on whether Invesco QQQ Trust’s stellar performance can continue.
The rules underpinning the construction of the Nasdaq-100 Index, which these funds track, are borne out of Nasdaq’s desire to promote its exchange—not investment rationale. The benchmark plucks the 100 largest nonfinancial firms listed on the Nasdaq and weights them by market capitalization. It automatically excludes stocks listed elsewhere, which shrinks the fund’s opportunity set. Some large-cap tech stocks that seem to fit the Nasdaq 100 mold, like Salesforce and Oracle, are precluded from the portfolio because of their New York Stock Exchange listing.
The Nasdaq-only remit leads to sector concentration. Technology (54% the portfolio), communication services (16%), and consumer cyclical stocks (12%) collectively shaped between 75% and 90% of the index portfolio over the past five years, a much heftier share than peers. Companies within these sectors derive revenue from differentiated sources. But they are still three of the market’s more volatile sectors, and their makeups don’t guarantee resiliency in challenging environments like 2022, when these funds slid further than their respective peers.
The funds weight stocks by market cap, with some modifications to reduce concentration. Market-cap weighting channels the collective market’s view on the relative value of each holding and curbs turnover. It’s a particularly sensible approach in the large-cap space. These stocks attract vast investor attention and tend to be priced fairly accurately.
Market-cap weighting and a 100-stock cap can breed a top-heavy portfolio. The fund can find itself concentrated in a few companies, but it can enact special rebalances to spread the wealth. It did just that in July 2023, shrinking its seven largest holdings from 55% to 43% of the portfolio.
More recently, Invesco QQQ converted from a unit investment trust to an open-end fund on Dec. 22, 2025. Invesco also lowered the fund’s fee to 0.18% from 0.20%. The changes confer marginal benefits for fundholders, but it does not change Morningstar’s opinion of the index.
Invesco QQQ: Performance Highlights
This index has compiled a phenomenal track record. From Invesco QQQ’s March 1999 inception through April 2026, its 10.5% annualized return trounced the US fund large-growth Morningstar Category average by 3 percentage points and the S&P 500 by 2 percentage points, albeit with more volatility than both. The index stumbled when the dot-com bubble burst but hasn’t looked back since: The US-domiciled exchange-traded fund tracking this index ranked among the top decile of US large-growth mutual funds and ETFs over the trailing five-, 10-, and 15-year periods.
Mega-cap and technology bets paid off for the index. Over the past 15 years, mega-cap stocks have done extremely well, rewarding this fund for favoring the market’s largest companies. Meanwhile, tech stocks powered most of the US market’s climb in the 2010s and beyond. Whether it was Apple AAPL, Microsoft MSFT, Nvidia NVDA, or any of the market’s elite, these highflyers used their runway to drive the fund ahead.
The trajectory of the technology sector can affect how the index measures up to rival strategies. Invesco QQQ slid 32.5% in 2022 compared with the S&P 500’s 18.1% fall, as tech stocks were some of the hardest hit by rising interest rates. But momentum soon turned. The index climbed 27.6% annualized from 2023 through 2026, better than most US-growth strategies as tech stocks soared.
