This ETF Would Have Increased Your Investment by 6x Over the Past 10 Years -- and It's Still Soaring

The Invesco QQQ Trust (NASDAQ: QQQ) is a tech-heavy Nasdaq-100 exchange-traded fund (ETF) that has impressively -- yet quietly -- turned long-term investors into winners over the past 10 years. Had you invested a decade ago, the fund would have increased your money six times over. Better yet, the fund's momentum shows little sign of slowing.

QQQ tracks the Nasdaq-100 index, a collection of 100 of the largest companies listed on Nasdaq. The fund tilts heavily toward tech and communication services, and has delivered eye-popping returns of roughly 513% over the past decade. That means a $10,000 investment made 10 years ago would have grown to around $61,000

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Why QQQ has performed so well

The ETF's outperformance stems from its exposure to many of the world's most innovative, emerging, and profitable companies. By tracking the Nasdaq-100, the fund naturally focuses on sectors that benefit from multiple waves of digital transformation, including e-commerce, cloud computing, and artificial intelligence (AI).

Together, premium valuations and strong earnings drove the roughly 21% annualized 10-year return, outpacing most other major growth ETFs.

No signs of slowing down

Looking to more recent results, QQQ has earned around 27.15% over the past year and boasts a 100.65% total return over five years. Each result reaffirms the ETF's status as a leader among broad growth funds. While past returns don't guarantee future returns, a $10,000 investment today could still compound dramatically over time.

Weighing potential rewards and risks

As with any investment, it pays to weigh rewards against risks. Here's a breakdown of each:

Potential rewards

• Growth: QQQ includes some of the largest and most innovative companies in operation today, primarily in the tech sector. Because technology is still emerging, there's potential for higher growth rates.
• Historical performance: QQQ has outperformed many other indexes over the past 10 years, particularly during bull markets.
• Diversification: While QQQ leans heavily toward technology and communications services, it's not the same as investing in a single stock. Instead, because it's an ETF, QQQ provides exposure to a wide range of companies, reducing the risk associated with individual stocks.
• Liquidity: Investors can buy and sell shares easily throughout the trading day.
• Dividends: While QQQ is not necessarily a dividend-focused investment, the ETF distributes dividends, offering some income potential.

Potential risks

• Volatility: The tech sector can be highly volatile, meaning the fund can experience significant price swings, exposing investors to loss.
• Concentration: A significant portion of QQQ's holdings is concentrated in a few major companies, including Nvidia, Apple, and Alphabet. This concentration can amplify risk if holdings underperform.
• Sector risks: Issues specific to the technology sector -- such as regulatory changes or technological obsolescence -- could adversely impact QQQ's performance and returns.
• Interest rates: Growth stocks, like QQQ, can react negatively to rising interest rates as borrowing costs increase.

The primary takeaway is this: Investing in the Invesco QQQ Trust can offer significant growth but also comes with risks. Weigh all factors based on your investment goals and risk tolerance.

Dana George has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.