QQQ Index ETF (NASDAQ: QQQ) will reach $400 by 2022.
What Are ETFs?
ETF stands for exchange-traded fund. An ETF is an investment fund whose shares trade on a stock exchange just like stocks for individual companies.
ETFs track an index or sector, represent a commodity (like gold, oil or wheat) or sample a basket of stocks or bonds that meet given criteria.
Exchange-traded funds are popular with investors given they can help mitigate risk in a portfolio.
The QQQ ETF tracks the NASDAQ 100, which includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq exchange based on market capitalization. The fund and the index are rebalanced quarterly and reconstituted annually.
With 48% of QQQ’s weighted allocation stemming from the information technology sector, it’s no surprise that after hitting a 2020 low of $165 in March, QQQ closed 2020 just shy of $314.
As of publishing, QQQ’s five largest holdings are Apple Inc (NASDAQ: AAPL) (13.39% of allocation), Microsoft Corporation (NASDAQ: MSFT) (10.76%), Amazon.com, Inc. (NASDAQ: AMZN) (10.66%), Facebook, Inc. Common Stock (NASDAQ: FB) (4.26%) and Tesla Inc (NASDAQ: TSLA) (3.45%).
QQQ Forecast 2021:
Being that QQQ representation is heavily dependent on and allocated towards tech, healthcare and consumer services, investors told us they believe the ETF will grow alongside an improving US economy in 2021, as well as a continued surge in demand and interest for the ETF’s most popular stocks — Tesla, Apple and Amazon.
Respondents also believe QQQ will see strength throughout 2021 given that the sector allocation of the ETF’s NASDAQ-100 representation is dominated by information technology (48%), communication services (19%) and consumer discretionary (19%) stocks.
If the US economy were to improve throughout 2021, it can be said that information techology, communication services and consumer discretionary sectors stand to gain the most in the coming months.
Why Is the Nasdaq 100 Better Than the Dow Jones?
The Nasdaq 100 is not as famous as the Dow Jones Industrial Average, but it is superior in many ways, including because it is:
*Broader: The Nasdaq holds 100 stocks to the Dow Jones’ 30 holdings.
*More fully representative of the big market leaders: The Nasdaq 100 gives greater weight to companies with the most value trading in the market. This is arguably a superior method to the Dow’s. The Dow weights stocks based on their per-share prices. This makes no logical sense, as Microsoft should not be given twice more influence than Apple simply because it trades for about $210 a share and Apple just $110. They are both worth more than $2 trillion.
*More rules based: The Nasdaq 100 relies less heavily on human intervention. Changes are made to both the Dow and Nasdaq 100 as stocks are put in and taken out. Humans choose what is in the Dow and when changes are made. But since the Nasdaq 100 owns all large Nasdaq stocks, there is no judgment in what goes in and what comes out each year.
*A better performer: Perhaps most importantly, the Nasdaq 100 blows away the Dow in terms of gains. QQQ stock returned 15.2% annually over the past 15 years, which includes dividends. The SPDR Dow Jones Industrial Average ETF (DIA) returned only 9.6% annually during that time. And over the past five years, the QQQ returned 22.1% annually, topping the 12.7% return by the Dow.
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