There are 11 main sectors that companies fall into, but none may be as popular to investors as the tech sector. For the past couple of decades, it has been the face of growth, propelling many tech companies' valuations. As of the end of April, seven of the 10 most valuable companies in the world are tech companies.
Given this sector's success, it makes sense that investors would want in on the action. However, instead of investing in individual companies and taking on their risks, a good route would be investing in a broad tech exchange-traded fund (ETF).
If you want to get exposure to many top players in the tech sector, the Invesco Nasdaq 100 ETF(NASDAQ: QQQM) is a good go-to to get exposure to the index by that name: the Nasdaq-100.
So, what exactly is the Nasdaq-100?
The Nasdaq Composite is one of the U.S. stock market's three major indexes, along with the S&P 500 and Dow Jones. It contains all companies trading on the Nasdaq stock exchange. The Nasdaq-100 is closely related, except it tracks the largest 100 non-financial companies on the Nasdaq stock exchange.
Although the Nasdaq-100 is heavily weighted toward tech stocks, it does cover a decent amount of ground in other sectors. Here's how the Invesco Nasdaq 100 ETF is broken down by sector:
- Information technology: 49.47%
- Communication services: 15.86%
- Consumer discretionary: 13.09%
- Consumer staples: 6.58%
- Health care: 6.11%
- Industrials: 4.66%
- Materials: 1.59%
- Utilities: 1.28%
- Financials: 0.53%
- Energy: 0.52%
- Real estate: 0.28%
Having the ETF consist mostly of tech stocks while diversifying a bit across other sectors can allow investors to get exposure to the booming tech sector while hedging some of the risks that come with sector-specific volatility. Take the 2022 bear market, for example, when the tech sector far underperformed the broader market (based on S&P 500 companies).
Sit back and let your winners lead the way
The Invesco Nasdaq 100 ETF is market cap-weighted, so larger companies make up more of the ETF. Here are its top 10 holdings:
| Company | Percentage of Invesco NASDAQ 100 ETF |
|---|---|
| Microsoft | 8.71% |
| Apple | 7.54% |
| Nvidia | 6.32% |
| Amazon | 5.38% |
| Broadcom | 4.64% |
| Meta Platforms | 4.47% |
| Alphabet (Class A) | 2.92% |
| Alphabet (Class C) | 2.84% |
| Costco | 2.41% |
| Tesla | 2.34% |
Data source: Invesco. Data as of April 26.
Having the top 10 holdings account for over 47% of the ETF makes it top-heavy, but in this case, it's proven to be a good thing. Looking at the top five holdings (almost a third of the ETF), the worst-performing stock over the past decade is Apple, and it's up over 715% in that span. Not too shabby, I'd say.
The Invesco Nasdaq 100 ETF not only ensures investors get exposure to many of the top tech companies in the world, but it's also those companies leading the way for the roughly 100-stock ETF.
Low fees help investors keep more gains
The Invesco Nasdaq 100 ETF has an expense ratio of 0.15%, meaning investors will pay $1.50 per $1,000 invested annually. It may be more expensive than S&P 500 ETFs (the stock market's most popular type of ETF), but it's still cheaper than many other go-to ETFs.
For example, the Invesco QQQ Trust ETF -- which also tracks the Nasdaq-100 -- has a slightly higher expense ratio of 0.20%. Those differences may seem small on paper, but for long-term investors who may eventually have a lot invested in the ETFs, they can really add up.
Warren Buffett once famously said that the number one rule in investing was "don't lose money," and the second rule was to "never forget rule number one." It's always great to make money with investments, but it's even better when you keep more of that money to yourself instead of paying it out in fees. The Invesco Nasdaq 100 ETF does a good job of ensuring the latter.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Microsoft, 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.
