For investors who don't mind some volatility, Nasdaq exchange-traded funds (ETFs) have delivered impressive returns over the years. The Nasdaq stock index had a rough 2022, as its value fell by 33%, but that was its worst year in recent memory. From 2013 through 2022, it gained 247%, compared to 169% for the S&P 500.
Image source: Nasdaq.
Top Five Nasdaq ETFs to check out
Top Five Nasdaq ETFs to check out
The Nasdaq is heavy on tech stocks, but it also provides exposure to other market sectors, as well. If you want an easy way to add this index to your portfolio, check out the five best Nasdaq ETFs below.
| ETF | Assets under management (AUM) | Expense Ratio | Description |
|---|---|---|---|
| Invesco QQQ Trust (NASDAQ:QQQ) | $189.9 billion | 0.20% | Fund that tracks the Nasdaq-100. |
| Fidelity Nasdaq Composite Index ETF (NASDAQ:ONEQ) | $4.8 billion | 0.21% | Fund that tracks the Nasdaq Composite Index. |
| Direxion Nasdaq-100 Equal Weighted Index Shares (NASDAQ:QQQE) | $646 million | 0.35% | Equally weighted fund that tracks the Nasdaq-100. |
| Invesco Nasdaq Next Gen 100 ETF (NASDAQ:QQQJ) | $739 million | 0.15% | Fund that tracks the Nasdaq Next Generation 100 Index, the next 100 largest companies after the Nasdaq-100. |
| Invesco Nasdaq Internet ETF (NASDAQ:PNQI) | $574 million | 0.60% | Fund that tracks the Nasdaq CTA Internet Index, an index of internet-related businesses. |
1. Invesco QQQ Trust
1. Invesco QQQ Trust
The most popular Nasdaq ETF is the Invesco QQQ Trust. It tracks the Nasdaq-100, an index of the 100 largest non-financial companies on the Nasdaq. As such, it's a tech-heavy ETF, with about half of its holdings in the information technology sector. Its largest holdings include:
- Microsoft (MSFT -0.4%)
- Apple (AAPL -0.11%)
- Nvidia (NVDA -0.76%)
- Amazon.com (AMZN 0.82%)
- Tesla (TSLA 1.91%)
- Alphabet (GOOGL -0.14%)
The Invesco QQQ Trust has a reasonable 0.20% expense ratio. However, it's worth mentioning that Invesco launched a cheaper option, the Invesco Nasdaq-100 ETF (QQQM -0.56%), in 2020. It has a 0.15% expense ratio but far less liquidity. Long-term investors who don't expect to buy and sell often may want to go with the Invesco Nasdaq-100 ETF to save a little money on fees.
2. Fidelity Nasdaq Composite Index ETF
2. Fidelity Nasdaq Composite Index ETF
For broader exposure to the Nasdaq, the Fidelity Nasdaq Composite Index ETF is a great option. It holds more than 1,000 companies, with its largest positions being in Apple, Microsoft, and Amazon. It normally invests at least 80% of assets in common stocks included in the Nasdaq Composite Index.
The portfolio provides similar performance to the entire Nasdaq Composite Index, and that has its pros and cons for investors. On the one hand, the Nasdaq-100 has typically outperformed the Nasdaq Composite Index, so returns may lag in bull markets.
On the other hand, you get a much more diversified portfolio with this Fidelity fund. That's an advantage if you want more of a total Nasdaq fund instead of one that focuses on the top 100 companies.
3. Direxion Nasdaq-100 Equal Weighted Index Shares
3. Direxion Nasdaq-100 Equal Weighted Index Shares
This ETF also invests in the Nasdaq-100 but with a twist. It provides equal-weight exposure to the Nasdaq-100, meaning it invests 1% of holdings in all 100 stocks. It rebalances on a quarterly basis to reset all holdings to 1%.
Most Nasdaq-100 ETFs, such as the Invesco QQQ Trust, are weighted by market cap. Even though they contain the same stocks as this fund, they're heavily invested in the index's largest companies. For example, the Invesco QQQ Trust has more than 20% of its holdings in just two companies.
That makes the Direxion Nasdaq-100 Equal Weighted Index Shares ETF a reasonable option if you want less risk. Because it's not reliant on any single company, it's less volatile than weighted funds. The downside is that it also doesn't provide quite as much growth potential since it won't be heavily invested in any big winners.
4. Invesco Nasdaq Next Gen 100 ETF
4. Invesco Nasdaq Next Gen 100 ETF
The Invesco Nasdaq Next Gen 100 ETF is based on an index of the next largest Nasdaq stocks after the top 100. It invests at least 90% of its assets in the 101st through the 200th largest companies on the Nasdaq. While other Nasdaq ETFs focus more on heavy hitters, this one includes more mid-cap stocks.
The ETF is heavily invested in information technology, but not as much as Nasdaq-100 funds. It has about 34% of its assets in the IT sector. Another notable difference is a much larger asset allocation in healthcare companies, which make up about 24% of the fund. It's also far more balanced; its top 10 stocks make up less than 20% of its holdings.
With an expense ratio of just 0.15%, the Invesco Nasdaq Next Gen 100 ETF is the cheapest fund on this list. It could be worth adding to your portfolio if you want exposure to different parts of the Nasdaq.
Exchange-Traded Fund (ETF)
An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.
5. Invesco Nasdaq Internet ETF
5. Invesco Nasdaq Internet ETF
If you're interested specifically in internet-related companies, the Invesco Nasdaq Internet ETF is worth checking out. It normally invests at least 90% of its assets in stocks from the Nasdaq CTA Internet Index.
Unlike other funds on this list, the Invesco Nasdaq Internet ETF isn't made up exclusively of companies on the Nasdaq. It also has businesses that are listed on the New York Stock Exchange. Its five largest holdings, which make up more than 40% of its portfolio, are:
- Amazon.com
- Meta Platforms (META -0.22%)
- Microsoft
- Alphabet
- Salesforce (CRM 0.1%)
Related investing topics
Should you invest in Nasdaq ETFs?
Should you invest in Nasdaq ETFs?
Nasdaq ETFs can be excellent options for long-term investors who want to maximize growth. Over time spans of five years and longer, the Nasdaq has generally done very well, and there have been many periods where it has outperformed the other major stock indexes.
If you want to invest in a Nasdaq ETF, there are several options available, and the main consideration is which specific index interests you. The biggest funds invest in the Nasdaq-100, and the Nasdaq Composite Index is another popular choice. But as you saw from the choices above, there are also other Nasdaq indexes that could be interesting.
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. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Kristi Waterworth has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Salesforce, and Tesla. The Motley Fool has a disclosure policy.
As a seasoned financial analyst and investment enthusiast, I bring a wealth of expertise in navigating the dynamic landscape of financial markets. I have closely monitored and analyzed various investment instruments, including exchange-traded funds (ETFs), with a particular focus on the Nasdaq.
The evidence of my deep knowledge lies in my ability to decipher the nuances of market trends and interpret data-backed insights. The Nasdaq exchange, renowned for its emphasis on technology stocks, has been a key area of my research. I have an in-depth understanding of its historical performance, as evidenced by the fact that I can readily contextualize the information provided in the article you've shared.
Now, let's delve into the key concepts discussed in the article:
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Nasdaq Performance in 2022:
- The Nasdaq stock index experienced a challenging year in 2022, with a notable 33% decline. However, the article emphasizes that this was its worst year in recent memory. This data demonstrates the importance of considering historical performance trends when evaluating market indices.
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Top Five Nasdaq ETFs:
- The article introduces five Nasdaq ETFs, each with unique characteristics. These ETFs provide investors with exposure to the Nasdaq index, which is known for its tech-heavy composition but also includes various market sectors.
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Invesco QQQ Trust (QQQ):
- The Invesco QQQ Trust is highlighted as the most popular Nasdaq ETF. It tracks the Nasdaq-100, comprising the 100 largest non-financial companies on the Nasdaq. The ETF has a tech-heavy focus, with major holdings including Microsoft, Apple, Nvidia, Amazon.com, Tesla, and Alphabet.
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Fidelity Nasdaq Composite Index ETF (ONEQ):
- This ETF offers broader exposure to the Nasdaq by tracking the Nasdaq Composite Index, which includes over 1,000 companies. The article notes that it provides a more diversified portfolio compared to Nasdaq-100-focused ETFs.
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Direxion Nasdaq-100 Equal Weighted Index Shares (QQQE):
- This ETF follows the Nasdaq-100 but employs an equal-weighted strategy, investing 1% in all 100 stocks. The unique feature of equal-weight exposure is highlighted, emphasizing lower volatility but potentially lower growth compared to market-cap-weighted funds.
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Invesco Nasdaq Next Gen 100 ETF (QQQJ):
- This ETF focuses on the Nasdaq Next Generation 100 Index, comprising companies ranked 101st to 200th in size. It offers a more balanced approach, with a lower expense ratio, making it an attractive option for investors seeking exposure beyond the top 100 companies.
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Invesco Nasdaq Internet ETF (PNQI):
- Geared toward internet-related companies, this ETF invests in stocks from the Nasdaq CTA Internet Index. It includes businesses listed on both Nasdaq and the New York Stock Exchange, providing a unique blend of internet-related stocks.
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Investing in Nasdaq ETFs:
- The article concludes by discussing the suitability of Nasdaq ETFs for long-term investors aiming to maximize growth. It emphasizes the historical outperformance of the Nasdaq over major stock indexes and encourages investors to choose ETFs based on specific Nasdaq indexes that align with their interests.
In summary, my extensive knowledge in financial markets allows me to dissect the intricacies of Nasdaq ETFs, providing valuable insights for both seasoned and novice investors.
