QQQ Volatile as Dot-Com Bubble Peak Turns 25
The technology boom and bust was a valuable lesson for advisors.
This week marks the 25th anniversary of the legendary dot-com bubble’s peak. It was also the beginning of a massive bear market, an extreme test for the new exchange-traded fund, Invesco QQQ Trust (QQQ) and a lasting lesson for financial advisors.
1999 was the best year for performance in the dot-com bull market. The QQQQ ETF, which would later change its ticker to today’s three Qs, soared 80% that year, surging amid the strongest yearly gain for what was the largest bull market in history at the time, as speculative mania over internet and technology stocks reached its peak. The S&P 500 also had a strong year, rising about 20%.
This exuberance peaked by QQQ’s first anniversary, March 10, 2000, leading to a sharp decline that ultimately resulted in the dot-com crash.
Fast-forward to 2025, a year that follows another 80%+ gain for QQQ, albeit a feat that took two years to accomplish.
Where does the Nasdaq 100 ETF go from here?
If this week is any indication, 2025 may look more like 2000 than 1999, as Monday’s anniversary date saw QQQ drop 3.9% amid rising recession fears.
The Dot-Com Bubble, a Valuable Lesson for Young FAs
I started my financial services career in 1998, just in time to catch the last two years of the dot-com bubble, when stocks like Microsoft Corp. (MSFT), Cisco Systems Inc. (CSCO) and Qualcomm Inc. (QCOM) were the darlings of the new technology era.
I had barely heard of ETFs, as mutual funds were still the place to invest, especially at Janus Capital Group (today known as Janus Henderson), the mutual fund company that rose and fell with the infamous Enron stock—a top holding in many of its funds.
My strongest memories of the dot-com bubble are its valuable lessons.
The period was characterized by irrational exuberance, where investors chased internet and technology stocks without regard for valuation, earnings or business fundamentals. When the bubble burst, the Nasdaq Composite fell nearly 80%, wiping out trillions in market value.
One key lesson is the importance of valuation discipline. During the late 1990s, many advisors and investors ignored traditional valuation metrics, believing that rapid growth justified any price. However, fundamentals always matter, and unsustainable valuations eventually correct, often violently. Advisors should emphasize diversification and risk management, ensuring clients avoid overconcentration in speculative sectors.
Market Timing, Herd Mentality and Guiding Clients
Another crucial takeaway is the danger of market timing and herd mentality. Many investors jumped into dot-com stocks near the peak, fearing they would miss out on further gains. When the market collapsed, they panicked and sold at the bottom. Financial advisors should help clients maintain a disciplined, long-term investment strategy rather than chasing fads.
The dot-com crash also reinforced the importance of asset allocation and rebalancing. Investors who maintained a diversified portfolio—rather than being overexposed to tech stocks—weathered the downturn better. Advisors should regularly rebalance portfolios, taking profits from overheated sectors and reallocating to undervalued areas.
Ultimately, the dot-com era underscores the importance of educating clients about risk, speculation and financial history. By applying these lessons, advisors can guide clients through market cycles with greater confidence, avoiding the pitfalls of speculative bubbles while focusing on long-term wealth building.
