The BetaShares Nasdaq 100 ETF (ASX:NDQ) has now given back all of its YTD gains and then some. Is it in the buy zone today?
The post Why this ASX tech ETF is in the buy zone appeared first on The Motley Fool Australia. –
There is an enormously wide range of ASX exchange-traded funds out there for Aussie investors to peruse. There are your standard market-tracking funds that blindly follow the S&P/ASX 200 Index (ASX: XJO).
Then there are specific, or thematic ETFs, that might focus on an individual sector, such as robotics or health care.
There are even funds that don’t cover shares at all — ETFs can track all manner of assets, from property, to government bonds, to gold and silver.
A US tech-focused ETF
The BetaShares Nasdaq 100 ETF (ASX: NDQ) lies somewhere in the middle of this wide range. This ETF tracks an index – the NASDAQ-100 (INDEXNASDAQ: NDX) to be precise. But this index doesn’t cover an entire market, as an ASX 200 ETF might. Over in the United States, there are 2 primary stock exchanges – the Nasdaq and the New York Stock Exchange.
The Nasdaq, for a variety of reasons, tends to be the exchange that tech companies like to list on. So you won’t find ‘old-style’ companies like General Motors Inc (NYSE: GM) or 3M Co (NYSE: MMM). Instead, it’s top constituents are tech giants like Apple Inc (NASDAQ: AAPL), Microsoft Inc (NASDAQ: MSFT) and Tesla Inc (NASDAQ: TSLA). These are the companies that the BetaShares Nasdaq 100 ETF tracks. Thus, it’s not really an index fund in the same vein as a fund tracking the S&P 500 Index (INDEXSP: .INX) is, but it’s more index-like than a pure tech-focused ETF.
So what does NDQ give you as an investor? Well, As we discussed earlier, Apple, Microsoft and Tesla make up 3 of the fund’s 4 largest current holdings. Amazon.com Inc (NASDAQ: AMZN) is the other. But you’ll also get moderate exposure to other tech giants like Facebook Inc (NASDAQ: FB), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), Paypal Holdings Inc (NASDAQ: PYPL). Netflix Inc (NASDAQ: NFLX), and Adobe Inc (NASDAQ: ADBE).
So why consider this ETF today?
NDQ suffers rare pullback
Well, it hasn’t had a very pleasant few weeks.
NDQ units are down around 9% since 5 February, which happens to be the date NDQ made its last all-time high. Indeed, on the current unit price, NDQ is now down 2.5% year to date as well. Today alone, it’s lost 2.7% at the time of writing. The weakness is of course underpinned by a shaky start to the year for the underlying Nasdaq 100 Index.
There’s another factor in play as well. Since Nasdsaq companies are listed on a US exchange, a rising Aussie dollar also means that the value of NDQ’s holdings in Aussie dollar terms has also been falling.
Now, the Nasdaq is renowned for being an index that has delivered stellar performance almost non-stop over the past decade. The BetaShares Nasdaq ETF has only been around since 2015. But since its launch, it has returned roughly 163% in capital gains alone.
Including dividend distributions that equates to an average of around 21.25% per annum. Speaking of dividends, this ETF currently offers a trailing distribution yield of 2.4%. That’s not bad for a US-based ETF coming from a market not known for its love of a dividend.
All of this adds up to make the BetaShares Nasdaq 100 ETF worthy of consideration today.
Where to invest $1,000 right now
*Returns as of February 15th 2021
- Growth outlook fails to save the Aristocrat share price today
- ASX 200 down 2.3%: Afterpay & Kogan sold off, Orica smashed, AMP pushes higher
- The Harvey Norman (ASX:HVN) share price slips despite soaring profits
- Hansen Technologies (ASX:HSN) share price rises on profit surge
- Apple investors shouldn’t ignore these 3 weaknesses
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. Sebastian Bowen owns shares of 3M, Alphabet (A shares), Facebook, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Adobe Systems, Alphabet (A shares), Amazon, Apple, Facebook, Microsoft, Netflix, PayPal Holdings, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends 3M and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended Adobe Systems, Alphabet (A shares), Amazon, Apple, BETANASDAQ ETF UNITS, Facebook, Netflix, and PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.