The best technology ETF to invest $1,000 in right now

The S&P 500 has generated a total return of 253% over the last decade. That’s a fantastic win for a passive investment vehicle that offers access to a large group of companies across a variety of industries.

However, some investors may want to invest in specific sectors of the economy, such as technology-related companies. If this sounds like you, you should consider purchasing the $1,000 Invesco QQQ Trust (QQQ 2.72%). Here’s why.

Owning dominant technology companies

The Invesco QQQ Trust is a exchange traded fund (ETF), which tracks the performance of the 100 largest non-financial stocks on the Nasdaq stock exchange. This is very different from the S&P 500, which tracks the movements of the 500 largest U.S. companies.

Investors need to understand the composition of the Invesco QQQ Trust. Exposure to the information technology sector is strong, accounting for 51% of assets. And the so-called “Magnificent Seven“together make up 43% of the ETF.

Historically, this has worked well. These companies generally experienced strong growth. Because they benefit from numerous tailwinds such as artificial intelligence, digital payments, digital advertising, electric vehicles, e-commerce and cloud computing. Today, these seven companies are among the most valuable in the world.

Outstanding performance

The S&P 500 has delivered impressive returns in recent years, but the Invesco QQQ Trust has performed much better. Over the last decade, it has generated a total return of 443%, representing an annual gain of 18.4%. A $1,000 investment in October 2014 would be worth more than $5,400 today.

It helped that the economy was largely in a low interest rate environment for much of that time. This favorable environment fueled the rise of top stocks in the QQQ.

Investors might think that owning this ETF is expensive. However, that couldn’t be further from the truth. The Invesco QQQ Trust Expense ratio of 0.2% means that for every $1,000 invested per year, only $2 goes towards the fee. Investors are able to keep more of their money over time.

In recent years the… Ark Innovation ETFCathie Wood’s flagship fund, Ark Invest, has attracted a lot of attention. Like the QQQ, it also focuses on companies that are innovative and disruptive, but its performance has been abysmal. Over the past five years, the Ark Innovation ETF has generated a total return of 12.8%, much less than the Invesco QQQ Trust’s 164%. And the Ark Innovation ETF has an expense ratio of 0.75%, almost four times that of QQQ.

Remember that

The Invesco QQQ Trust has had a wonderful year so far, rising 21.5% (as of October 30). With it trading near its all-time high, some hesitant investors may be considering whether now is still a good time to invest. After all, isn’t it a better idea to just wait for a significant decline before investing?

In theory, the right move seems to be to time the market, buy at the lows and sell at the highs, and repeat this process over and over again. However, this is a losing proposition as no one can implement it consistently and accurately. In fact, you’re doing more damage to your portfolio.

So perhaps the best course of action is to invest the $1,000 in the Invesco QQQ Trust now and adopt a long-term mindset. If you want to distribute this investment, use a Dollar cost averaging A strategy that involves investing a small amount of capital each month or quarter. This allows you to benefit from multiple price points without having to time the market correctly.