Yes, QQQ is an ETF, and it tracks the Nasdaq-100 index

QQQ is an exchange-traded fund managed by Invesco that holds 100 large companies listed on the Nasdaq stock exchange. It trades on the Nasdaq under the ticker symbol QQQ, which is why people often call it by that name instead of its full name, the Invesco QQQ Trust. When you buy one share of QQQ, you own a small piece of all 100 companies in the fund at once.

The fund is weighted by market capitalisation, meaning the largest companies make up a bigger portion of what you own. Technology companies dominate QQQ — roughly 50 percent of the fund is in tech stocks — so QQQ moves more when tech stocks move than when other sectors move. That concentration is the main thing that separates QQQ from other broad market ETFs.

QQQ trades during regular stock market hours just like an individual stock does. You can buy it through any brokerage account, and the price changes throughout the day based on what other investors are willing to pay for it.

Key Takeaways

  • QQQ holds 100 large Nasdaq-listed companies and lets you own all of them with a single purchase.
  • The fund is heavily weighted toward technology companies, so it tends to rise and fall more sharply than funds that spread money across all sectors equally.
  • You can buy and sell QQQ shares during market hours through any brokerage, and the price moves throughout the day.
  • QQQ charges an annual expense ratio of 0.20 percent, meaning you pay $20 per year for every $10,000 you invest.

How QQQ differs from other broad market ETFs

The most important difference is what QQQ holds. An ETF that tracks the S&P 500 holds 500 companies spread across all sectors of the economy — technology, healthcare, finance, energy, consumer goods, and others. QQQ holds only 100 companies, and they skew heavily toward technology. That means QQQ will outperform a broader fund when tech stocks are rising, but it will fall harder when tech stocks drop.

QQQ also differs from total market ETFs, which hold thousands of companies of all sizes. Those funds include small and mid-sized companies that QQQ does not. If you want exposure to the entire U.S. stock market, a total market ETF is broader. If you want concentrated exposure to large tech-heavy companies, QQQ is more focused.

The expense ratio — the annual cost to own the fund — is 0.20 percent for QQQ. That is low compared to actively managed funds, which often charge 0.50 to 1.00 percent or more, but it is typical for passively managed ETFs that simply track an index.

What companies are actually in QQQ

The 100 companies in QQQ change over time as the Nasdaq-100 index is rebalanced, but the fund always includes the largest and most liquid non-financial companies on the Nasdaq. The top 10 holdings typically account for roughly 45 to 50 percent of the fund's value. As of recent data, these have included companies like Apple, Microsoft, Amazon, Nvidia, Tesla, Meta, Broadcom, Costco, Invesco (the fund's own manager), and PepsiCo.

Because the fund is weighted by market cap, when Apple's stock price rises, your QQQ shares become worth more — not because you own more Apple shares, but because Apple makes up a larger percentage of the fund's total value. The same is true in reverse: if Apple's price falls, QQQ falls with it.

You can find the complete current list of holdings on Invesco's website, and the list updates regularly as companies enter and leave the Nasdaq-100.

How to buy QQQ and what to expect

You can purchase QQQ through any brokerage that offers stock and ETF trading — this includes large firms like Fidelity, Charles Schwab, and Vanguard, as well as smaller online brokerages. You do not need a special account type; a regular taxable brokerage account works fine. Some retirement accounts like IRAs also allow QQQ purchases.

The price of one QQQ share changes throughout each trading day based on supply and demand. Unlike mutual funds, which are priced once per day after the market closes, ETFs like QQQ can be bought and sold at any time during market hours. This means you see the price move in real time, and you can sell whenever you choose.

Most brokerages charge no commission to buy or sell QQQ shares, though some may charge a small fee depending on your account type. Check your brokerage's fee schedule before you trade.

Tax treatment of QQQ in regular accounts

When you hold QQQ in a taxable brokerage account, you owe capital gains tax when you sell shares for more than you paid for them. If you hold the shares for more than one year before selling, you pay long-term capital gains tax, which is usually lower than short-term rates. If you sell within one year, you pay short-term capital gains tax at your ordinary income tax rate.

QQQ also pays dividends, though they are modest compared to the fund's overall returns. You owe income tax on those dividends in the year you receive them, whether you reinvest them or take them as cash. If you hold QQQ in a tax-advantaged account like a traditional or Roth IRA, you do not owe tax on gains or dividends until you withdraw money from the account.

Risks specific to QQQ

Because QQQ is concentrated in technology and large-cap stocks, it carries more risk than a diversified fund that spreads money across many sectors and company sizes. When tech stocks fall, QQQ falls harder than the overall market. This happened notably in 2022, when QQQ lost roughly 33 percent of its value while the S&P 500 lost roughly 18 percent.

QQQ is also sensitive to interest rate changes. When the Federal Reserve raises interest rates, investors often move money out of growth stocks (which QQQ holds) and into bonds or dividend-paying stocks. This can cause QQQ to drop even if the companies in the fund are performing well.

If you are uncomfortable with the possibility of losing a third or more of your investment in a single year, QQQ may be too concentrated for your situation. Mixing QQQ with other ETFs that hold different sectors or company sizes can reduce this risk.

Frequently Asked Questions

Is QQQ the same as the Nasdaq-100?

QQQ is an ETF that tracks the Nasdaq-100 index, so they move together. The index itself is just a list of 100 companies and their prices. QQQ is the actual fund you can buy and sell. When people say "QQQ is up 5 percent," they mean the fund's price has risen 5 percent, which reflects the index's movement.

Can I hold QQQ in a retirement account?

Yes. QQQ can be held in traditional IRAs, Roth IRAs, 401(k)s, and other retirement accounts, depending on what your plan or account provider allows. Holding QQQ in a retirement account means you do not owe tax on gains or dividends until you withdraw money, which can be a significant advantage over holding it in a taxable account.

What is the difference between QQQ and QQQ3?

QQQ3 is an inverse ETF that moves in the opposite direction of QQQ. If QQQ drops 10 percent, QQQ3 rises roughly 10 percent. Inverse ETFs are designed for short-term hedging or betting against the market, not for long-term holding. Most individual investors should not use QQQ3 as a core holding.

Does QQQ pay dividends?

Yes, QQQ pays dividends, though they are typically small — usually less than 1 percent of the fund's value per year. The dividend comes from the companies in the fund and is paid out quarterly. You can choose to reinvest dividends automatically or receive them as cash, depending on your brokerage settings.

How does QQQ perform compared to the S&P 500?

QQQ outperforms the S&P 500 when technology stocks are rising and underperforms when they are falling. Over the past decade, QQQ has returned more than the S&P 500 on average, but with higher volatility. The difference depends entirely on which years you measure and whether tech stocks are in or out of favor.