QQQ Is Good For Entering This Kind Of Market

The Invesco QQQ exchange-traded fund appears to be an excellent way to enter into the coronavirus-roiled market with a solid, diversified foundation. As compared to other broad market-oriented indices and funds the QQQ ETF is geared towards large technology companies and communications services while avoiding heavy weightings to sectors such as financials and energy which may suffer particularly amid a coronavirus-spurred economic drought.

Furthermore, the QQQ ETF, as it aims to mimic the NASDAQ-100 index, consists of large-cap companies of the above-described sectors. Many small and medium cap companies may have a greater weighting in some other broad market funds but these are the smaller companies that may, as the coronavirus financial crunch hits, find themselves in the most serious liquidity crises.

As the QQQ ETF describes on its legal prospectus, the ETF holds all NASDAQ-100 stocks and attempts to market-capitalization balance them to represent the NASDAQ-100 index with quarterly rebalancing and annual reconstitution. The structure of the ETF itself is strong with only a 0.20% gross expense ratio consisting of a 0.09% NASDAQ-listing fee, 0.05% trustee fee, and 0.06% marketing fee. The fund is one of the oldest ETFs, having begun on March 10, 1999 in the tech bubble, and as of Wednesday's close had a sturdy $82.928 billion in assets under management.

The benefit of QQQ's tracking of the NASDAQ-100 index in this market environment, as compared to other broad index funds, is that it has sector diversification that is better prepared to cushion against the coronavirus impact and is moderately weighted towards large and medium-cap companies.

(Source: Invesco QQQ Fund Page)

The coronavirus pandemic is causing severe business disruption to many section of the economy with some of the hardest-hit industries being travel, leisure, retail, restaurants, and other companies that are fueled by people engaging in community and in-person joy. The NASDAQ-100 index, and thus QQQ, has almost half of its holdings in information technology companies that will be hit by a coronavirus, largely through decreases in online ad sales and the few components that have retail lines, but nonetheless will see less of a devastating decline in business and may even seem boosts in some online activity and purchases.

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Disclaimer: These are only my opinions and do not constitute investment advice.

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