Why I Don't Buy and Hold the Invesco QQQ Trust (QQQ)

You've probably heard of the Invesco QQQ Trust (QQQ). Launched on March 10, 1999, it's one of the most well-known ETFs (technically a Unit Investment Trust, or UIT) in the world today.

For many investors, QQQ has become synonymous with “tech stocks” or even “growth investing” in general. I often find people gauging the pulse of innovation-driven equities by looking at QQQ’s performance, rather than digging into the underlying Nasdaq-100 index (NDX).

And if you scroll through Reddit investing forums or YouTube finance channels, you’ll see a common refrain telling new investors to “buy and hold QQQ,” especially if they believe in the long-term dominance of the Magnificent Seven.

Now, QQQ is a top-tier ETF in terms of liquidity and is hugely popular among active traders and options users. But for someone looking to buy and hold growth/tech exposure as part of a long-term investing plan, I don’t think QQQ is the best choice. Here’s why.

Why Not QQQ: Higher Fees with No Pressure to Cut

QQQ has about $338 billion in assets under management and charges an expense ratio of 0.20%. That may not sound like much at first glance, but when you do the math, it adds up fast.

At 0.20%, Invesco earns roughly $676 million annually from QQQ alone, assuming the asset base stays steady. That’s a massive revenue stream from just one product. So, it’s no surprise they have little incentive to lower fees, especially when QQQ’s loyal investor base isn’t going anywhere.

Part of that loyalty comes from embedded capital gains. Many QQQ holders have owned it for years, sitting on large unrealized profits. Because QQQ distributes relatively little income (thanks to its low dividend yield), it’s been a tax-efficient compounder.

Selling it would trigger a potentially hefty tax bill, which keeps investors locked in, even if cheaper alternatives exist. And cheaper alternatives do exist.

If your goal is broad growth stock exposure, you can buy the Schwab U.S. Large-Cap Growth ETF (SCHG). It costs just 0.04%, and its portfolio has significant overlap with QQQ. That’s five times cheaper.

Or, if you're really targeting tech, the Vanguard Information Technology ETF (VGT) charges just 0.09%. Again, you’ll find heavy overlap with QQQ, think Apple, Microsoft, NVIDIA, and friends.

QQQ is an excellent ETF, but it's expensive compared to similar options offering nearly identical exposure. Unless you’re already sitting on huge gains, you’re probably better off using SCHG or VGT for long-term buy-and-hold strategies.

Why Not QQQ: The Index Construction is Nonsensical

Everyone loves to debate index weighting—how ETFs decide to allocate to stocks and when they rebalance. The most common method is market cap weighting, where bigger companies get bigger allocations.

Then there are countless alternatives like fundamental weighting, where allocations are based on financial metrics like earnings or dividends instead.

That’s not my issue with QQQ. My problem is with how QQQ selects its holdings in the first place, and frankly, it makes no economic sense. Here’s how it works in a nutshell:

1. Take all the companies listed on the Nasdaq exchange
2. Exclude financials
3. Pick the 100 largest remaining companies

That’s it. So instead of picking stocks based on their business models, growth profiles, or innovation, QQQ just asks: “Are you on the Nasdaq? And not a bank? Cool, you’re in.”

Sure, the Nasdaq has a rep for tech and innovation. But if you're trying to build a serious portfolio, basing inclusion on which exchange a stock happens to trade on is arbitrary at best. You can get actual tech or growth exposure with more targeted ETFs. There’s no need for this roundabout method.

And here’s the kicker: QQQ isn’t even purely tech. Its top holdings may be the big tech names—Apple, Microsoft, NVIDIA—but further down the list, you’ll find stocks like Costco, Pepsi, Linde, AstraZeneca, and Amgen.

Good companies? Sure. But if you thought you were buying a pure-play tech fund, this is far from it. If your goal is innovation, QQQ delivers—just not in the way you think.

Why Not QQQ: The Drawdown Risk Is Massive

Take off the rose-colored glasses tinted by a decade of ZIRP and runaway multiple expansion. QQQ is a high-risk investment. It always has been. Don’t believe me? Just look at this chart.

If you bought QQQ at inception in March 1999, you would’ve sat through a drawdown of nearly -82%. It took 15 years to recover and make a new all-time high.

Fifteen years of bag-holding. Fifteen years of seeing nothing but red in your account. All while international stocks and boring bonds held their own. Turns out diversification works.

And no, “I’ll just dollar-cost average down” is a coping mechanism. Most people won’t keep buying something that’s underwater for a decade and a half. At some point, everyone capitulates.

Yes, I’ve heard the excuses: “The QQQ of 2000 was different.” Sure. But all I’m saying is it happened once, and you can’t rule out that it’ll happen again. Investing isn’t lightning. Disasters strike the same spot all the time.

The Final Word on QQQ

Let me be crystal clear: I have nothing against QQQ. In fact, I occasionally use it, but not as a buy-and-hold investment.

In terms of trading, nothing beats QQQ in the Nasdaq-100 space. For me, QQQ is my go-to when it comes to options trading. Whether I'm writing covered calls, selling cash-secured puts, or setting up collars to hedge my long exposure to Nasdaq-heavy stocks, QQQ’s liquidity makes it ideal.

The volume is consistently high, the bid-ask spreads are razor-thin, and the options chain is incredibly robust. You get daily expirations, a wide range of strike prices, and deep open interest. That flexibility allows me to execute complex multi-leg strategies without worrying about slippage or execution issues.

But here’s the point: the very factors that make QQQ a great trading instrument are also what make it less optimal for passive, long-term investors.

If you're looking to build wealth over time by simply tracking the Nasdaq-100, you're better off with lower-cost ETFs like QQQM (same index, lower fee) or even SCHG and VGT, which overlap heavily with QQQ but charge much less.