Why is this tech ETF such a high performer?
The post Here’s why the Betashares Nasdaq 100 ETF (ASX:NDQ) is outperforming this year appeared first on The Motley Fool Australia. –
There are many index exchange-traded funds (ETFs) on the ASX boards. But one in particular has caught the eye of many investors due to its recent performance history. That ETF is the BetaShares Nasdaq 100 ETF (ASX: NDQ).
Yes, this ETF is technically an index fund, since it faithfully tracks the shares in the NASDAQ-100 (INDEXNASDAQ: NDX), the index which tracks the largest 100 companies by market capitalisation on the Nasdaq exchange.
But its recent performance figures are not what is typically thrown up by an index fund.
This BetaShares Nasdaq 100 ETF has returned 16.16% over just the past six months, and a whopping 31.62% over the past 12 months. It has also returned an average of 27.15% per annum over the past three years, and an average of 22.47% per annum since its inception in 2015. Those numbers would be enough to make even Warren Buffett blush.
That return since inception metric of 22.47% per annum would have turned $10,000 into more than $72,000 in just 10 years. If you add another 10 years, you would be left with a lump sum of over $520,000.
With NDQ returning more than 16% in 2021 so far, it is vastly outperforming the S&P/ASX 200 Index (ASX: XJO). The ASX 200 has managed an impressive 9.47% in 2021 so far. But that number is still close to half of what NDQ has banged out.
So how has NDQ managed such an impressive performance history?
Why has the BetaShares Nasdaq 100 outperformed in 2021 so far?
Well, as with any ETF, it all comes down to its underlying holdings.
Let’s take a look at what this ETF currently holds:
Current ETF Weighting (%), as of 20 July
Apple Inc (NASDAQ: AAPL)
Microsoft Corporation (NASDAQ: MSFT)
Amazon.com Inc (NASDAQ: AMZN)
Facebook Inc (NASDAQ: FB)
Tesla Inc (NASDAQ: TSLA)
NVIDIA Corporation (NASDAQ: NVDA)
PayPal Holdings Inc (NASDAQ: PYPL)
Adobe Inc (NASDAQ: ADBE)
Comcast Corporation (NASDAQ: CMCSA)
As you can see, NDQ’s holdings reflect the tech-heavy nature of the Nasdaq 100 Index itself. The FAANG stocks are right up there in terms of weighting, bolstered by Microsoft and Tesla.
But what do all of these companies have in common? Rip-roaring performance in recent years, that’s what. Just take Apple, this NDQ ETF’s top holding with a weighting of 11.6%. Apple shares are currently up almost 13% in 2021 so far, more than 50% over the past 12 months, and almost 500% over the past five years.
Microsoft is up 28.3% year to date, 33.8% over the past 12 months, and almost 400% over the past five years.
We see similar numbers with Amazon, Alphabet and Facebook shares. And then there’s Tesla, which is up 1,386% over the past five years. Or NVIDIA, which is up almost 1,400% over the same period.
You get the idea. With holdings that are putting up such incredible performances in recent times, it’s suddenly not too hard to see why NDQ can boast such impressive numbers. Past performance is no guarantee of future success, of course. But as long as its underlying companies pile on the gains, this ETF will follow suit.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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. Teresa Kersten, an employee of LinkedIn, a Microsoft 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 its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen owns shares of Alphabet (A shares), Facebook, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Facebook, Microsoft, Nvidia, PayPal Holdings, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adobe Inc. and Comcast and has recommended the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Adobe Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Nvidia, and PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.