What Can QQQJ Do for Your Portfolio? | ETF Trends

While Invesco’s flagship product, the Invesco QQQ Trust (QQQ), provides access to the 100 largest non-financial companies listed on the Nasdaq, the Invesco NASDAQ Next Gen 100 ETF(QQQJ) offers that approach with a twist: exposure to the next 100 largest companies listed on the Nasdaq, excluding financials.

It’s understandable for investors to focus on the biggest, most successful companies, but what about the mid-cap companies whose biggest growth spurts may be ahead of them?

With a mid-cap focus, the companies in QQQJ are defined by their high expenditures on research and development as a proportion of revenue, which could prime them for high future growth. Research and development spending is considered a key measure of a company’s commitment to innovation. Research and development can lead to new discoveries, competitive advantages, and cost-saving measures, according to Invesco.

The idea behind the junior Q is that it gives investors easy exposure to a slew of Nasdaq stocks that might prove to be the next big thing. For investors concerned about a size bias in their tech holdings, the junior Q can also help offset the large-cap tilt of QQQ and the Q mini.

The next tranche down the ladder of the Nasdaq 100 includes familiar names Trade Desk, Zillow, Etsy, DraftKings, and Expedia, according to ETF Database.

Thanks to their high growth profiles and innovative business models, some companies may eventually “graduate” from QQQJ’s holdings into QQQ.

QQQJ’s holdings aren’t just limited to technology. QQQJ tracks an index of the largest non-financial stocks listed on the Nasdaq that aren’t included in the Nasdaq-100 index. Consumer services, transportation, consumer durables, and retail trade are sectors included in the fund and weighted at over 4.5%, according to ETF Database.

The portfolio has overweighted yield exposure and liquidity exposure compared with category peers. High yield exposure is attributed to holding high dividend-paying or buyback stocks, and is suitable for income seekers outside of fixed income. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility, according to Morningstar.

The fund charges an expense ratio of 15 basis points.

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