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Is This Tech-Heavy ETF Due for a Slowdown?
Investing in tech stocks is generally a good idea for the long haul. These are the types of investments which can generate significant returns, much more than dividends can. And one exchange-traded fund (ETF) which gives investors some excellent exposure to tech stocks is the Invesco QQQ Trust (NASDAQ:QQQ).
The fund invests in the top 100 non-financial stocks on the Nasdaq exchange. But that can be both a blessing and a curse, as 59% of tech stocks account for the portfolio's weight. That means if the top tech stocks are too expensive, that could make it difficult for the fund to outperform the markets in the future.
Currently, the ETF is averaging a price-to-earnings ratio of 36. And the danger is that with an underwhelming jobs report coming in last week, that could be a sign of slowing growth in tech in the future. While it's potentially good news as it may mean rate cuts could be around the corner, if growth rates slow down, that may not be enough to keep tech stocks from falling.
Year to date, the fund is up around 6%. But over the past decade, it has produced returns of 400%. The Invesco QQQ Trust can be a good ETF to hang on to for the long term but if you aren't planning to hold on for years, now may be a good time to consider cashing out as there could be more downside for the ETF in the near future, especially if economic conditions worsen.
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