This ETF Is Down 7% From Its High. History Says Now Is a Smart Time to Invest.

Although the Invesco Nasdaq 100 ETF (NASDAQ: QQQM) has had a good year so far, up 12.7% year to date through July 23, the past month or so hasn't been the best, with it down over 7% from its June high. This is far from the time to ring the alarm, but the lull period could be a good time to invest.

Admittedly, a 7% drop isn't much, but a 7% "discount" is always better than no discount. If you're looking for an exchange-traded fund that can be a portfolio staple (especially with tech stocks), QQQM is a great choice to consider right now.

Image source: Getty Images.

Two factors that encourage investing right now

There are two key reasons why now is a good time to invest in QQQM. The first is that you don't want to find yourself trying to time the market and holding off, expecting it to fall further. It could rise while you expect a drop and cause you to miss out on gains. As the investing adage goes: Time in the market beats timing the market.

The second is that despite any rough patch that the Nasdaq-100 has hit (QQQM has only been around since October 2020), it has continued to produce good long-term numbers. Could this time be different? Absolutely. Past results don't guarantee future performance, but history is on QQQM's side.

Data by YCharts.

Sentiment will eventually come back in QQQM's favor

Although QQQM isn't a pure-play tech ETF, the sector accounts for 68.5% of it, and all its top holdings are tech companies (though some are technically classified in a different sector):

• Nvidia: 8.06%
  
• Apple: 7.73%
  
• Micron Technology: 4.85%
  
• Microsoft: 4.74%
  
• Amazon: 4.28%
  
• Advanced Micro Devices (AMD): 3.94%
  
• Alphabet (Class A): 3.25%
  
• Meta Platforms: 3.06%
  
• Tesla: 3.04%
  
• Alphabet (Class C): 3.03%

Right now, investors are cooling on the "Magnificent Seven" stocks but loving more niche industries, like memory and storage hardware companies and other semiconductor stocks. That's largely why Microsoft, Amazon, Meta, and Tesla are underperforming the market this year (with three in the negative), and Micron and AMD are up 211% and 149% year to date as of the time of writing.

With many of tech's flourishing stocks right now in cyclical industries (and on the high end of the cycle), I think investors will eventually return to more mega-cap tech companies to find "stability" in the sector. This would be a nice growth boost for QQQM, considering how much these stocks account for in the ETF.

If you were to invest now, I think the chances of regretting the decision years down the road are very slim. Again, nothing is guaranteed in the stock market, but the long-term risk-reward trade-off is in investors' favor.

Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.