Should you invest in the BetaShares NASDAQ 100 ETF? – (ASX:NDQ)
There's no doubting ETFs are becoming more popular with retail investors. We take a look at the NASDAQ 100 ETF from BetaShares.
With Australian exchange traded fund (ETF) provider BetaShares, in the midst of a national roadshow to promote ETFs to local investors, we take a look at their flagship product: The NASDAQ 100 ETF (ASX:NDQ).
The BetaShares NASDAQ 100 ETF provides exposure to a technology sector that is under-represented within Australian markets. Local investors often have a large exposure to financials and miners, but lack exposure to tech.
What is an Exchange Traded Fund (ETF)?
Exchange traded funds are a low-cost investment fund that can be traded on a stock exchange such as the Australian Securities Exchange (ASX). These funds are created by ETF issuers and fund managers, and are comprised of a basket of securities.
Each ETF is allocated an ASX code and can be bought and sold by investors on the ASX in the same way that you would buy and sell shares. By investing in ETFs, you can easily create a diversified portfolio and spread your exposure across a wide range of markets and asset classes.
Due to the simple, diversified exposure they offer, it's unsurprising to hear that many young Australians are turning to ETFs. The fact that your investment performance isn't reliant on beating the market, but rather being invested long term in a diversified index, is one appealing factor.
What is the NASDAQ 100 ETF?
The NASDAQ 100 is a US stock index featuring some of the brightest technology names in the world. The ETF contains the top 100 companies listed on the NASDAQ exchange.
Think Apple, Facebook, Google, Netflix and the like. Technology giants whose products you most probably interact with on a daily basis, featuring massive revenue and balance sheets to boot.
But instead of buying international shares outright, BetaShares offers their NASDAQ 100 ETF as an ASX listed product. By searching for ASX:NDQ on your Australian share trading platform, you can quickly gain access to a diversified portfolio of the top technology companies listed on the NASDAQ exchange.
Why the NASDAQ 100 ETF is worth considering
The NASDAQ 100 index has a 60.1% weighting toward technology stocks, versus the ASX 200 index weighting of just 2.3%. With Australian market options obviously quite limited, investors searching for tech exposure should particularly consider the NASDAQ 100 ETF.
Dave Bassanese from BetaShares, wrote an excellent blog post comparing the technology sectors within the ASX 200 and the NASDAQ 100. Even by just flicking down the page, it's clear from the charts just how big the divergence between the performance of the two markets are.
While the whole market is currently experiencing a global macro inspired swoon, the BetaShares NASDAQ 100 ETF's performance over the past three years has been robust, returning an average of 16.47% per annum to investors. With management fees of just 0.48% per annum, these are healthy numbers.
With Australia's technology sector generally more expensive, more speculative and less diversified than our US counterparts, adding the NASDAQ 100 ETF to a diversified portfolio is certainly worth consideration.