If I Were in My 20s, I'd Buy This Spectacular Nasdaq-100 Index Fund and Hold It Forever

The Nasdaq is often the stock exchange of choice for small technology companies looking to go public, because it offers lower fees and fewer compliance barriers compared to alternatives like the New York Stock Exchange. Over the last few decades, many of those budding companies have become trillion-dollar giants, which now feature in the Nasdaq-100.

The Nasdaq-100 is an index of the 100 largest companies listed on the Nasdaq, excluding banks and financial institutions. Over 65% of the value of its entire portfolio is parked in the high-growth technology sector, which is why it usually outperforms the more diversified S&P 500 (SNPINDEX: ^GSPC) index.

Higher returns typically come with higher volatility, but that might be a worthwhile trade-off for younger investors, because it can lead to a much stronger financial position later in life. If I were in my 20s, here's why I'd buy the Invesco QQQ ETF (NASDAQ: QQQ), which mimics the Nasdaq-100, and hold it forever.

Image source: Getty Images.

America's best high-growth tech stocks in one ETF

The technology sector has consistently led the broader stock market higher over the last two decades, thanks to the incredible growth in areas like semiconductors, smartphones, cloud computing, enterprise software, and artificial intelligence (AI). All of the companies that make up the top 10 holdings in the Invesco QQQ ETF are laser-focused on AI right now, whether they are designing chips, building models, or developing software.

Data source: Invesco. Portfolio weightings are accurate as of Aug. 31, 2026, and are subject to change.

There is currently a global shortage of the specialized data center chips and components required to process AI training and inference workloads, because semiconductor suppliers simply can't produce them fast enough to meet the significant demand. Nvidia's graphics processing units (GPUs) are the world's best AI data center chips, but AMD is quickly catching up from a technological perspective.

High bandwidth memory (HBM) keeps data flowing smoothly to GPUs to accelerate processing speeds and minimize bottlenecks. It's a red-hot commodity right now, which is benefiting Micron, one of the industry's top suppliers. The company's soaring revenue and earnings growth have sent its stock rocketing higher by 700% over the past year alone.

Alphabet, Microsoft, and Amazon are three major buyers of AI data center chips. They rent the computing capacity to other businesses via their respective cloud platforms, which has become an extremely lucrative practice. But they are also developing AI models and software to integrate with their existing products and services; Alphabet, for instance, created AI Overviews and AI Mode to enhance its Google Search platform.

The AI boom started gathering momentum at the beginning of 2023, which aligns with OpenAI's ChatGPT application crossing 100 million users for the first time. Since then, the top 10 stocks in the Invesco ETF have delivered an eye-popping average return of over 500%.

NVDA data by YCharts

The Invesco ETF could supercharge a young investor's retirement

AI is certainly driving the Invesco QQQ ETF higher right now, but it has a stellar long-term track record dating back to its launch in 1999. It has delivered a compound annual return of 10.6% over that 27-year stretch, whereas the S&P 500 has returned an average of just 8.6% per year.

The 2-percentage-point difference might not sound like much, but it would have a dramatic impact in dollar terms over the long run thanks to the effects of compounding. Past performance isn't always a good indicator of future results, but below is how much money 25-year-old investors could have at retirement if they park $20,000 in the Invesco QQQ ETF versus the S&P 500, assuming their average returns remain the same.

Calculations by author.

Therefore, investors could have more than double the amount of money in retirement by focusing on growth versus taking a more conservative approach. However, this strategy will definitely experience more volatility along the way -- for example, the Invesco QQQ ETF suffered a peak-to-trough decline of 35% during the 2022 bear market, whereas the S&P 500 fell by a lesser 25%.

Investors who aren't willing to stomach such steep drawdowns might prefer to put some of their money in the Invesco QQQ ETF and the rest in an S&P 500 index fund instead. This strategy can still produce strong returns over the next 40 years, while reducing volatility.

In any case, it might be a good idea to continue holding the Invesco ETF beyond retirement age, because with a large enough balance, the subsequent annual returns could provide a solid income to supplement life after employment.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.