The Best Index ETF to Invest $1,000 in Right Now

Investing in the stock market is one of the best ways to help create wealth over the long term. However, picking individual stocks is not an easy task. In fact, only about 15% of professional fund managers have been able to outperform the S&P 500 index over the past decade. These investors have a wealth of resources and analysis at their disposal and still struggle to beat the market.

Meanwhile, a JPMorgan study looking at stocks between 1980 and 2020 found that 40% of those listed in the Russell 3000 -- which consists of the 3,000 largest stocks traded in the U.S. -- suffered losses of 70% or more and never recovered. In addition, 66% of stocks underperformed the Russell 3000.

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So what is an individual investor to do?

Well, one of the best ways for ordinary people to invest is through index exchange-traded funds (ETFs) that track market indexes. ETFs that track the popular S&P 500 are a good place to start, but there is one ETF that has consistently outperformed the S&P 500, and that is the Invesco Nasdaq 100 ETF (NASDAQ: QQQ).

Technology leads the way

The Invesco Nasdaq 100 ETF tracks the Nasdaq-100 Index, which consists of the 100 largest non-financial companies traded on the Nasdaq stock exchange. The Nasdaq tends to draw more growth-oriented companies, as it is much more heavily weighted toward the technology sector.

Technology continues to transform the world we live in, and artificial intelligence (AI) could be a once-in-a-generational opportunity. In fact, Amazon recently said AI is a once-in-a-lifetime business opportunity and the biggest technological shift and opportunity since the internet. Many of the world's largest companies today are technology companies, or at least have a pretty tech-heavy component.

An investment in the Invesco Nasdaq 100 ETF gives holders investments in many of the technology companies leading the way with AI. As of the end of 2024, nearly 60% of the ETF was in tech companies, while another 20% was in consumer discretionary stocks. Notably, the index classifies companies like Amazon and Tesla, both of which have heavy tech components, as consumer discretionary stocks.

The ETF's top 10 holdings, meanwhile, are loaded with top tech and tech-related companies. Together, its top 10 holdings make up more than 50% of its overall portfolio. Below is a list of Invesco Nasdaq 100 ETF's top 10 holdings as of the end of 2024, and their weighting within the ETF.

Source: Invesco.

The Invesco Nasdaq 100 ETF also comes with a strong record of outperformance. The ETF boasts that it has outperformed the S&P 500 index by 443.4% since it launched in 1999, as of the end of 2024. During that stretch the ETF has gained an astonishing 1,089%.

Over the past decade, the ETF is up 459% as of the end of January, easily outpacing the 263% return of the S&P 500. That equates to an average annual return of 18.8%. Over the past five years, the ETF has generated a return of 146.2%, or 19.8% a year, compared to 102.6%, or 15.2% a year, for the S&P 500.

Meanwhile, the ETF notes that on a rolling-12-month basis, it has outperformed the S&P 500 87% of the time over the past 10 years and 84% over the past five years.

Image source: Getty Images.

Dollar-cost averaging

While the Invesco Nasdaq 100 ETF is a great index to start investing in today, to build wealth over time you need to consistently set aside money to invest. This can be done using a strategy known as dollar-cost averaging, where you invest each month at regular intervals, whether the ETF is performing well or poorly at the time.

The market will have up and down periods, so the key is to be consistent through good times and bad. While painful, bear markets tend to be short-lived and are great times to invest for the long term. However, if you wait around for a bear market before investing, you're likely to miss out on some nice gains, as bull markets tend to last a pretty long time.

In fact, since 1950, the S&P 500 has hit all-time highs on about 7% of its trading days, and a third of these highs become new market floors from which the market doesn't dip lower.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Geoffrey Seiler has positions in Alphabet and Invesco QQQ Trust. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, JPMorgan Chase, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.