The Betashares Nasdaq 100 ETF (ASX: NDQ) has fallen far enough that I believe it's a very worthwhile investment opportunity.
Aside from currency effects, this exchange-traded fund (ETF) simply tracks the combined return of 100 of the largest non-financial businesses on the NASDAQ stock exchange in the US.
At the time of writing, the Betashares Nasdaq 100 ETF has fallen by around 27% since the start of 2022. That's a hefty decline for a large group of businesses in less than a year.
There are probably a few key reasons for the decline.
Inflation and interest rates
The share market is meant to have a bit of volatility sometimes. But, things have been particularly rough this year as inflation proved no longer to be "transitory" and remained stubbornly strong.
General price stability is one of the important factors for a good economy. Central banks don't want to let inflation become entrenched. So, they are raising interest rates to try to bring things under control.
In January 1990, the Reserve Bank of Australia (RBA) interest rate was 17.50%. During COVID-19, that dropped to just 0.1% (though there were a whole bunch of interest rate cuts in between).
Why do interest rates matter so much? Legendary investor Warren Buffett once said:
The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature … its intrinsic valuation is 100% sensitive to interest rates.
In other words, interest rates have a key role in influencing asset prices.
Why I think it's a good time to buy Betashares Nasdaq 100 ETF
The Betashares Nasdaq 100 ETF has fallen a long way this year. I like investing in businesses and investments that have good long-term prospects, at a good price.
In my opinion, a number of the businesses in the ETF's portfolio are among the best in the world at what they do. We're talking about names like Apple, Microsoft, Amazon, Tesla, Alphabet, Meta Platforms, Nvidia, Costco, Adobe, PayPal, ASML and Moderna.
I believe that this group of businesses can continue to perform well over the long term as they maintain and grow their competitive advantages, expand into new geographies and launch new services or products.
When is a great time to buy shares? I think it's when the asset price is at its lowest. Who knows if it's going to go any lower? I don't know, but I do think the current level is a good price for a long-term investment.
One of the attractive factors about this ETF is that its portfolio can steadily keep changing and evolving as new, promising businesses enter that top 100 list.
I've been buying shares this week, I think this could be a really useful time to be investing because of the lower prices.
