Here’s why the NDQ ETF is down almost 30% in 2022

NDQ units have had a rough year. Here’s why…

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Key points

  • It's been a rough year for ASX shares all round
  • The high-flying NDQ ETF has suffered immensely in 2022
  • NDQ's five-largest holdings are Apple, Amazon, Microsoft, Tesla, and Alphabet Inc

The BetaShares Nasdaq 100 ETF (ASX: NDQ) used to be one of the best-performing exchange-traded funds (ETFs) on the ASX. NDQ is, at its heart, a tech-based ETF — but technically, it’s an index fund.

This fund tracks the NASDAQ-100 Index (INDEXNASDAQ: NDX), which follows the largest 100 companies on the United States NASDAQ stock exchange.

The NASDAQ is one of the two major stock exchanges in the US. It is the one that most prominent tech companies call home in America, which gives it a heavy bias towards tech shares.

But 2022 has not been kind to this ETF. In fact, it’s been the worst start to a year that NDQ has ever gone through. Year to date, NDQ units are now down 28% on the ASX. That’s including the small gain that the fund managed today.

So what’s behind this dramatic change in fortune?

Why has the NDQ ETF had such a tough 2022 on the ASX?

Well, the problems the BetaShares NASDAQ 100 ETF has faced this year largely stem from its largest holdings.

It was NDQ’s exposure to tech giants like Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT) that helped it have such a strong few years before 2022.

But it is this same exposure that is dragging NDQ back to Earth this year.

The ETF’s five-largest holdings are Apple, Amazon, Microsoft, Tesla Inc (NASDAQ: TSLA) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). Together, these five tech giants make up more than 40% of NDQ’s portfolio weighting as it currently stands.

What’s happening with NDQ’s top 5 holdings?

We all know how successful these companies have been over the past few years. But 2022 has seen investors get cold feet.

Apple shares are now down more than 25% year to date.

Amazon shares have lost 36.8% over the same period.

Microsoft has shed 24.8%.

Alphabet’s Class A shares are down 24.3%, while Tesla has lost almost 42%.

So, this is why the BetaShares Nasdaq 100 ETF has been suffering so much pain over the year so far.

But consider this. Even though NDQ has been in the wars of late, this ETF has still (as of 31 May) managed to return an average of 18.15% per annum over the past five years, and 19.94% per annum over the past three.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet (A shares), Amazon, Apple, Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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