Billionaires Are Buying a Supercharged Index Fund That Includes Nvidia, Tesla, and Other “Magnificent Seven” Stocks

The S&P 500 is generally viewed as the best benchmark for the overall U.S. stock market due to its scope and diversity. The Invesco QQQ Trust has outperformed that benchmark during the last one year, three years, and five years. More impressive, the Invesco QQQ Trust doubled the return of the S&P 500 in the last decade , and tripled its return in the last two decades. as shown in the chart below.

Data source: YCharts. Returns shown are current as of December 11, 2024.

The downside of the Invesco QQQ Trust is volatility. The index fund has a three-year beta of 1.18, meaning it moved 118 basis points (1.18 percentage points) for every 100-basis-point movement in the S&P 500. That means good days tend to be better, but it also means bad days tend to be worse.

Consequently, the Invesco QQQ Trust would likely fall much more sharply than the S&P 500 during a stock market crash. Indeed, the S&P 500 declined 25% during the bear market that began in January 2022, but the Invesco QQQ Trust declined 36%.

The last item of consequence is the expense ratio. The Invesco QQQ Trust has an expense ratio of 0.2%, meaning investors will pay $20 per year on every $10,000 invested in the fund. That is below the industry average of 0.36%, according to Morningstar.

Here is the bottom line: Past performance is never a guarantee of future results, but the Invesco QQQ Trust has been a brilliant long-term investment. The fund has consistently outerperformed the S&P 500, and I think patient investors will see more of the same in the next decade. I see the catalyst for that outperformance as the growing popularity of artificial intelligence, robotics, and other technologies.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Billionaires Are Buying a Supercharged Index Fund That Includes Nvidia, Tesla, and Other “Magnificent Seven” Stocks was originally published by The Motley Fool