chip manufacturer Nvidia (NASDAQ:NVDA) has been one of the hottest growth stocks on the market, with shares more than tripling in the past year alone. But the hedge fund billionaires listed below sold their positions in Nvidia in the fourth quarter and shifted some of their capital into two high-growth index funds Invesco QQQ Trust (NASDAQ:QQQ) and that iShares US Technology ETF (NYSEMKT:IYW).
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Millennium Management’s Israel Englander sold 1.7 million Nvidia shares in the fourth quarter, reducing his stake by 45%. At the same time, he increased his position in Invesco QQQ Trust by 53% and opened a new position in iShares US Technology ETF.
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John Overdeck and David Siegel of Two Sigma Investments sold 30,663 Nvidia shares in the fourth quarter, reducing their stake by 5%. Meanwhile, the pair increased their position in Invesco QQQ Trust by 75%, making it Two Sigma’s second-largest holding. They also increased their stake in the iShares US Technology ETF by 214%.
These index funds are particularly attractive because they have outperformed the S&P 500 over the past 10 years. While the S&P 500 gained 228% over that period, the Invesco QQQ Trust returned 440% and the iShares US Technology ETF rose by 528%.
Here’s what investors should know about these index funds.
1. The Invesco QQQ Trust
The Invesco QQQ Trust measures the performance of the Nasdaq-100, which represents the 100 largest companies on the Nasdaq Stock Exchange. The index fund is heavily weighted toward the information technology (58.9%) and consumer discretionary (17.9%) sectors, the only two market sectors to outperform the S&P 500 over the past decade.
Below are the 10 largest positions in Invesco QQQ Trust by weight.
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Microsoft: 8.6%
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Apple: 7.8%
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Nvidia: 6.2%
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Alphabet: 5.6%
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Amazon: 5.6%
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Metaplatforms: 4.5%
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Broadcom: 4.3%
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Tesla: 2.5%
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Costco Wholesale: 2.4%
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Netflix: 1.8%
As mentioned, Invesco QQQ Trust returned 440% over the last decade, but its outperformance goes back even further. The index has returned 1,370% over the past two decades, representing an annual return of 14.3%. At this rate, $100 invested weekly (about $434 per month) would now be worth $587,500. By comparison, the same amount invested in an S&P 500 index fund would be worth $333,100.
The price of this outperformance was volatility. The Invesco QQQ Trust has a three-year beta of 1.19, meaning that for every 100 basis point move in the S&P 500, the index fund moved 119 basis points (1.19 percentage points). Remember that volatility decreases in both directions. It can result in significant outperformance when stocks are rising, but it can result in significant underperformance when stocks are falling.
The final point of the note is the expense ratio. The Invesco QQQ Trust has a relatively low expense ratio of 0.2%, meaning annual fees would total $20 for every $10,000 invested. This makes this index fund a very attractive option for investors who can handle volatility.
2. The iShares US Technology ETF
The iShares US Technology ETF measures the performance of 131 stocks in the information technology sector and allows investors to spread their money across the consumer electronics, semiconductor and software markets. The Index Fund is rebalanced quarterly to ensure that (1) no individual holding is weighted more than 22.5% and (2) the sum of holdings exceeding 4.5% does not together constitute more than 45% of the Fund .
Below are the 10 largest holdings in the iShares US Technology ETF by weight.
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Microsoft: 18.1%
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Apple: 15.5%
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Nvidia: 12.6%
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Alphabet: 5.9%
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Metaplatforms: 3.6%
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Broadcom: 2.9%
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Foreclosure: 2.4%
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Adobe: 2.1%
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Modern micro devices: 1.9%
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Qualcomm: 1.9%
The iShares US Technology ETF has consistently outperformed the S&P 500. I already mentioned that it has outperformed the market over the last decade, but the index fund has also returned 1,240% over the last two decades, which translates to an annual return of 13.8%. At this rate, $100 invested weekly would now be worth $547,900. The same amount invested in an S&P 500 index fund would be worth $333,100.
Similar to the Invesco QQQ Trust, the price of this outperformance has been volatility. The iShares US Technology ETF has a three-year beta of 1.24, meaning it moved 124 basis points for every 100 basis point move in the S&P 500. What’s even more concerning is that the iShares US Technology ETF has a fairly high expense ratio of 0.4%. . For comparison, the average expense ratio for US ETFs was 0.37% in 2022 Morning star.
Personally, I like the idea of jumping straight into the high-growth information technology sector, but I’d rather own it Vanguard Information Technology ETF (NYSEMKT:VGT). Not only has it performed slightly better over the last two decades, with an annualized return of 14.1%, but it also has a much lower expense ratio of 0.1%.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. 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. Trevor Jennewine has positions at Adobe, Amazon, Nvidia and Tesla. The Motley Fool has positions in and recommends Adobe, Advanced Micro Devices, Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, Qualcomm, Salesforce and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
“Billionaires Sell Nvidia Stock, Buy Two Top Index Funds That Beat the S&P 500 in the Last Decade” was originally published by The Motley Fool