Best Nasdaq 100 ETF: Ride the FAANGs (Australia, UK & US)
Techno-giants have been on a tear, but how do you buy them efficiently? I compare the lowest-fee Nasdaq 100 ETFs for Australian, UK, and US investors.
By 'best' I mean the lowest cost ETF that tracks the US technology stock index. If you are looking for the best nasdaq 100 etf in Australia, the UK, or the US, keeping fees low is the secret to maximizing your long-term returns.
Innovation, adaptation and disruption
Innovation, adaptation and disruption are the three qualities repeatedly demonstrated by companies in the Nasdaq-100 index. If you want to know how to invest in FAANG stocks (Meta, Amazon, Apple, Netflix, Google) and other tech giants like Nvidia, this index is the classic route.
Why Has The Nasdaq-100 Gone Ballistic?
Often seen as a "gauge of the modern economy", the Nasdaq-100 has been on an absolute tear over the last 4 decades. I am talking fast-moving tech companies and no slow-moving banks (the Nasdaq excludes financial companies).
Exposure to Growth
The Nasdaq-100 is heavily weighted towards technology and growth-oriented companies, which have historically shown strong long-term growth potential.
Diversification
While concentrated in technology, the index still offers some diversification across various sectors within the technology space.
Ease of Investment
Investors can gain exposure to the Nasdaq 100 through popular ETFs like the Invesco QQQ, making it relatively easy to invest in.
QQQ is a well-known ETF symbol associated with tracking the Nasdaq-100 index. Because the Nasdaq-100 includes many of the large, innovative tech companies like the FAANGs, investing in QQQ provides exposure to this specific segment of the market. The performance discussed for the Nasdaq-100 is reflected in the stock price for QQQ.
Also available is TQQQ which is generally known as a leveraged ETF tracking the Nasdaq-100, which involves significantly higher risk than unleveraged ETFs like QQQ, beware!
Below, I recommend QQQM over QQQ for US investors. In the battle of QQQM vs QQQ, QQQM has a lower expense ratio (0.15% vs. 0.2%), which makes it a much smarter choice for long-term investors.
Potential for High Returns
Historically, the Nasdaq 100 has outperformed broader market indices like the S&P 500 over the long term. Since 1985 the Nasdaq 100 has produced an annualized return of 14.06% (not including dividends). From December 31, 2007, to June 30, 2023, the Nasdaq-100 delivered a cumulative total return of 906%, more than double the S&P 500's 376% return. More recent data also shows strong performance; for example, the Nasdaq-100 had a 50.70% return from Feb '23-Feb '24, compared to the S&P 500's 29.82%.
It's Not All Unicorns and Rainbows
Despite their success, concerns about FAANG stocks persist. Some investors worry about a potential bubble and debate whether their valuations are justified, even with impressive business performance. Critics argue that their prices may be so high that achieving attractive long-term profits could be difficult. Volatility and the oversized influence they wield on the overall market are also sources of concern for some, with regulation now turning into action for some of these tech titans like Alphabet.
- Volatility: The Nasdaq 100 can be more volatile than broader market indices due to its concentration in high-growth sectors.
- Concentration Risk: The index is heavily influenced by a few large technology companies, which can increase risk if these companies underperform.
- Economic Dependence: The performance of the Nasdaq 100 is closely tied to the overall health of the technology sector and the global economy.
What ETFs to Buy
So without further ado, here are the lowest cost (and therefore best returns) ETFs available on UK, Australian and US markets.
UK Market
| ETF | Fees | Ticker |
|---|---|---|
| Xtrackers Nasdaq 100 UCITS ETF 1C Accumulating | 0.2% | LON:XNAQ |
Australian Market (Nasdaq-100 ETF ASX)
For a Nasdaq-100 ETF on the ASX, you have options like NDQ (Betashares) and N100 (Global X). While NDQ is the most popular, N100 is much cheaper, charging half the fee!
| ETF | Fees | Ticker |
|---|---|---|
| Global X US 100 ETF | 0.24% | ASX:N100 |
United States Market
| ETF | Fees | Ticker |
|---|---|---|
| Invesco NASDAQ 100 ETF | 0.15% | NASDAQ: QQQM |
It is crucial to remember that past performance is not indicative of future returns. The value of investments can fluctuate, and investors may not get back the full amount invested. This information is for general purposes and not financial advice.
