This top ETF has benefited from a combination of favorable tailwinds over the past decade.
Powerful technology companies make up a huge fraction of the Invesco QQQ Trust's portfolio.
Its annualized returns have far exceeded what the S&P 500 produced over the past decade.
Some people might think that in order to be successful investors, they have to learn how to pick the best individual stocks for their portfolios. Finding a winning stock early in its growth story can be exciting. However, this isn't the only way to find success in the market.
For instance, putting some of your hard-earned savings into the Invesco QQQ Trust (NASDAQ: QQQ) has also been a winning strategy. If you had invested $1,000 in this top exchange-traded fund (ETF) exactly 10 years ago, here's how much your position would be worth today.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
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Over the past decade, the Invesco QQQ Trust has generated a total return of 510%, so a $1,000 initial position would be worth $6,100 as of this writing. On an annualized basis, that translates to a yearly return of 19.8%. It's impossible to argue with that type of stellar performance.
Those impressive gains can be attributed to some critical factors. Significant inflows of capital into passive investment vehicles like index funds have increased the overall amount of capital in the stock market. The economy was operating in a low-interest-rate environment for many years, and that condition incentivizes risk taking. And of course, numerous tech enterprises have enjoyed monster success and come to dominate many industries.
All of this has propelled the Invesco QQQ Trust upward. The "Magnificent Seven" stocks now represent 44% of the ETF's assets, so it benefits from some powerful secular trends.
Investors shouldn't assume that any investment will perform the same way going forward as it did in the past. The ETF's future trajectory will depend on a host of conditions that are hard to predict.
It's better to manage your expectations for the fund's returns. Even if the Invesco QQQ Trust doesn't continue to deliver annualized gains of nearly 20% between now and 2035, it can still be a great investment opportunity.
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Neil Patel has positions in Invesco QQQ Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.