You might be impressed with Invesco QQQ Trust's 8.0% return this year. At least until you see all the ETFs beating it, including those tied to the S&P 500.
So far, 23 actively traded U.S. diversified ETFs, including Cathie Woods' ARK Innovation, Invesco S&P 500 High Beta and Renaissance IPO, are all up more than the Nasdaq 100, says an Investor's Business Daily analysis of data from Morningstar Direct and MarketSmith.
The Nasdaq 100 contains the 100 largest nonfinancial stocks on the Nasdaq. It is the basis of the Invesco QQQ Trust. The QQQ is racing higher so far this year as investors try to scoop up battered big-cap growth stocks following 2022's drubbing.
"Risk-on equity investments have regained the spotlight as investors believe that they will be rewarded as inflation slows down and the Fed takes its foot off the (interest rate hike) accelerator," said Todd Rosenbluth, head of research at VettaFi.
Cathie Woods' Amazing Start To The Year
If you're looking for the best place to put your money this year, you'll be hard-pressed to top Woods' ARK Innovation. The ETF is crushing it. It's up more than 20% this year as the fund is all-in with beaten-down growth stocks.
ARK Innovation's solid year exemplifies how the very worst stocks in and out of the S&P 500 are dominating this year so far. But long-term investors in the fund are still way down, following its 60% drop in 2022. Even after this year's rally so far, the ETF's totally annualized loss is 0.7% over the past five years.
'Active' ETFs Finally Paying Off
Strong performance from ARK Innovation is a win for ETFs that use human stock-pickers, versus those that follow an index, Rosenbluth says.
And ARK is not the only example. "Two of the better performing ETFs are actively managed from Fidelity and Capital Group," he said. "For years investors had to turn to mutual funds to tap into the security selections from these leading firms but now are benefiting from their higher quality growth approaches."
Specifically, Fidelity is flexing its muscles here.
The Fidelity Blue Chip Growth ETF, where human managers pick global growth stocks, is up 10.2% this year. Additionally, the Fidelity Growth Opportunities ETF, where managers choose U.S. and global growth stocks, is up 8.5%. And Capital Group, manager of the American mutual funds, has seen its new Capital Group Growth ETF return 9.0%.
Volatility Is In Again
If last year was all about dividends and safety, this year is completely different.
The Invesco S&P 500 High Beta ETF mines the popular market index for the most volatile stocks, not just in the Nasdaq 100, but in the broader S&P 500, too. And it's paying off big, returning 13.6% just this year. Meanwhile, the Invesco S&P 500 Low Volatility ETF, which owns slow-but-steady stocks, is down roughly 1%.
"I also think Invesco high beta is interesting as the fund is the polar opposite of the SPLV and has exposure to tech, consumer discretionary and financial stocks," Rosenbluth said. Similarly, the Renaissance IPO ETF, which only owns newly public companies, is up 10.6%.
There's also an opportunity to save money, too. The Invesco Nasdaq 100 ETF is up 8.1% this year, neck-and-neck with the Invesco QQQ. But it only charges 0.15% annually, versus 0.2% for QQQ.
"Why not choose QQQM over QQQ?" Rosenbluth said. "Same innovative large cap growth stocks but for a lower fee."
Think The Nasdaq Is Good?
Diversified U.S. ETFs outperforming Invesco QQQ in 2023 so far
| Name | Ticker | Year-to-date return |
|---|---|---|
| ARK Innovation | 20.07% | |
| Invesco S&P 500 High Beta | 13.56 | |
| Renaissance IPO | 10.60 | |
| Fidelity Blue Chip Growth | 10.24 | |
| SPDR S&P Kensho New Economies Comps | 9.99 | |
| VanEck Morningstar Wide Moat | 9.77 | |
| First Trust Mid Cap Value AlphaDEX | 9.61 | |
| Invesco S&P 500 Pure Value | 9.35 | |
| Capital Group Growth | 8.95 | |
| Vanguard Small-Cap Growth | 8.89 | |
| Invesco S&P SmallCap 600 Revenue | 8.88 | |
| iShares Morningstar Small-Cap Growth | 8.80 | |
| SPDR S&P 600 Small Cap Value | 8.56 | |
| iShares S&P Small-Cap 600 Value | 8.54 | |
| WisdomTree US SmallCap Earnings | 8.50 | |
| Fidelity Growth Opportunities | 8.45 | |
| Pacer US Small Cap Cash Cows 100 | 8.43 | |
| SPDR S&P 400 Mid Cap Value | 8.31 | |
| Fidelity Nasdaq Composite | 8.27 | |
| iShares S&P Mid-Cap 400 Value | 8.24 | |
| Schwab Fundamental US Small Company | 8.22 | |
| Vanguard Mega Cap Growth | 8.16 | |
| Invesco NASDAQ 100 | 8.09 | |
| Invesco QQQ Trust | 8.06 |
Sources: IBD, Morningstar Direct
Follow Matt Krantz on Twitter @mattkrantz
