Invesco QQQ, previously known as Powershares QQQ, is a widely held and traded exchange-traded fund (ETF) that tracks the Nasdaq 100 Index.

The Nasdaq 100 Index is composed of 100 of the largest international and domestic companies, excluding financial companies, that are listed on the Nasdaq stock exchange, based on market capitalization. Therefore, QQQ is heavily weighted toward large-cap technology companies and is often viewed as a snapshot of how the technology sector is trading. 

As an ETF, as opposed to an index, QQQ is a marketable security that trades on an exchange, offering traders a way to invest in the largest 100 non-financial companies listed on the Nasdaq.

The QQQ tracks the information technology, consumer discretionary, health care, consumer staples, industrials and telecommunication services sectors. QQQ is rebalanced quarterly and reconstituted annually.

As of Dec. 31, 2019, the sector breakdown of QQQ was: 

  • Information technology: 47.35%
  • Telecommunication services 20.88%
  • Consumer discretionary: 14.70%
  • Health care: 7.23%
  • Consumer staples: 5.98%
  • Industrials: 2.68%

The top 10 holdings of QQQ, as of Dec. 31, 2019, were:

  • Apple (AAPL): 11.59%
  • Microsoft (MSFT): 10.69%
  • (AMZN): 8.14%
  • Facebook (FB): 4.39%
  • Alphabet (GOOGL) Class A shares: 4.09%
  • Alphabet (GOOG) Class C shares: 4.08%
  • Intel (INTC): 2.95%
  • Cisco Systems (CSCO): 2.31%
  • Comcast (CMCSA): 2.31%
  • PepsiCo (PEP): 2.17%

Apple, by far the most important company for QQQ investors, has a market cap of around $1.28 trillion as of Mar. 5, 2020 — the largest in history. Apple has perfected the art of getting consumers into its ecosystem and not letting go, by upselling and releasing new versions of old products in order to keep revenue growing. 

Microsoft, Google, and Amazon are all highly innovative with strong operational cash flow. With the exception of Amazon, these top holdings all deliver consistently on the bottom line, which helps investors feel secure. Amazon, for its part, boasts rampant top-line growth.

Those looking for an ETF that comes with a very low expense ratio (0.2%, as of December 2019) and tracks quality names, may want to consider Invesco QQQ.