Investors in this ETF received more returns than they could reasonably expect

Exchange traded funds have an undeserved reputation. Many investors see them as an easy way out, forcing them to settle for market-adjusted returns rather than giving them a shot at beating the markets. If you want to be in control of your investments, then ETFs can feel like giving up.

But not every ETF aims to track the broader stock market. If you target certain parts of the market that outperform others, you can beat popular indexes like the S&P 500 and the Dow even if you take a passive approach. And you don’t have to give up the diversity advantage to get it.

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of the Invesco QQQ Trust (NASDAQ: QQQ ) A big winner for long-term investors, and that’s why I’m looking into this ETF to see if it’s worth adding. Voyager Portfolio. After discussing the history of Invesco QQQ in yesterday’s article, today you will learn more about how well the fund has performed and what is behind its good performance.

Most ETFs don’t spend a lot of time comparing different stock ETFs. They point out that one fund is as good as another when it comes to exposure to stocks, especially among large ETFs that track broadly tracked indexes.

But different markets don’t move in lockstep, and for the Invesco QQQ Trust, that’s been a key factor in its long-term success. That’s precisely because the ETF tracks the Nasdaq 100 index, which is made up of the 100 largest non-financial stocks by market cap that are listed on the Nasdaq stock market.

As it turns out, the Nasdaq 100 includes a group of companies that have been at the forefront of technological innovation over the past 15 years. In addition, it includes the major components you’ll find in broad index ETFs. This has significantly improved the performance of Invesco QQQ. The ETF has returned more than 18% annually since its inception in 2011 and more than 20% annually since 2016. That compares to 13.6% over the past 15 years and about 15% over the past decade for popular S&P 500 index funds.

If that sounds like an incredible feat, you’re right. The Nasdaq 100’s track record was enough to make Invesco QQQ a giant in the ETF universe. Over the past 15 years, only 2 of 390 large-cap growth funds have outperformed Invesco QQQ. It has a five-star rating from Morningstar due to its risk-adjusted performance over the past decade. And because it offers exposure to the Nasdaq 100 easily, it has become very popular with institutional investors as the second most traded ETF in the entire US market.

In fact, the performance of the Nasdaq 100 and the Invesco QQQ ETF has taught young investors that long-term exposure can prove dangerous. The return was so far above the long-term average that many skeptics fear a reversion to the mean is inevitable, which could punish Nasdaq-listed stocks in the index that the Invesco ETF tracks. If the market continues a decade or more with returns Below A long-term average like the Invesco QQQ has enjoyed above This, therefore, can be detrimental to financial prospects who invest in an ETF based on its past performance.

So if the Invesco QQQ Trust has done well but looks risky, what’s in store for investors right now? You will get some tips in the third and final article on Invesco QQQ Voyager Portfolio This should help you make the best decision for yourself.

Before you buy stock in Invesco QQQ Trust, consider this:

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Dan Kiplinger has no position in any of the stocks mentioned. The Motley Fool has no position in the stocks mentioned. Motley Fool has a disclosure policy.

Investors in this ETF have earned more than they could reasonably expect Originally published by The Motley Fool