Why the Betashares Nasdaq 100 ETF (NDQ) is on my buy radar right now

US tech shares have fallen heavily, so this could be a good time to go hunting.

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Key points

  • The Betashares Nasdaq 100 ETF has suffered a 25% sell-off this year
  • I believe it’s good value, offering exposure to many strong businesses like Apple and Microsoft
  • The management fee seems reasonable, in my opinion

The Betashares Nasdaq 100 ETF (ASX: NDQ) is a leading exchange-traded fund (ETF) that gives investors access to some of the biggest technology shares in the world.

There are a few sizeable tech businesses on the ASX, such as Xero Limited (ASX: XRO) and WiseTech Global Ltd (ASX: WTC).

But, they are small in comparison to names like Apple, Microsoft, Amazon.com and Alphabet (Google). I think US blue-chip shares are some of the most compelling blue chips around.

That's why I believe the Betashares Nasdaq 100 ETF is one of the most compelling ETF ideas at the moment.

Strong businesses

When I think about which are the strongest companies in the world, I'd point out ones like Apple, Microsoft, Amazon.com, Alphabet, Nvidia, Costco, Cisco Systems and so on. They are US giants.

I can't imagine how much money it would take to dislodge Apple and Alphabet from their spot on top of the smartphone industry. Alphabet's YouTube and Google Search seem to have incredibly strong positions. Amazon's cloud computing and e-commerce offerings are globally leading as well.

In terms of the shares that the Betashares Nasdaq 100 ETF is invested in, it's full of market leaders. Names such as Intuit, Starbucks, Adobe, Tesla, PayPal and Booking are even more examples of positions in powerful companies.

As a group, I think it can continue to do very well on the earnings side of things, over time.

Despite this year's difficulties, the ETF has managed average total returns of 17.4% per annum in the five years to 31 October 2022.

Big sell-off

I become very interested in an opportunity when a good business, or good ETF, is sold off heavily. Sometimes, they can fall too much.

I'm not sure where the US and Australian central bank interest rates are going to end up. I'm also not sure about how currency movements are going to go either. Inflation and interest rates have taken their toll.

But, I do know that the Betashares Nasdaq 100 ETF now looks much better value after falling around 25% in 2022 to date.

Being able to buy exposure to a very attractive group of companies looks good to me, particularly if a quarter of the price has been wiped off.

I believe that, as a group, many of these businesses can deliver earnings growth over the long term. Wherever interest rates get to in the US, I don't think they will stay that high forever. The normalisation of interest rates could be a boost for the ETF, in the future.

Reasonable management fee

The Betashares Nasdaq 100 ETF has an annual management fee of around 0.48%. This isn't the cheapest around — Vanguard US Total Market Shares Index ETF (ASX: VTS) has a fee of just 0.03% — but I think it's a reasonable fee to pay considering the quality of the underlying holdings.

Betashares Nasdaq 100 ETF looks like an attractive option at today's level. For me, the future net returns are the most important, not just the level of the management fee.

I don't know what the future returns will be, but it seems like it's set up to achieve success at this lower level.

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. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Booking Holdings, Cisco Systems, Costco Wholesale, Intuit, Microsoft, Nvidia, PayPal Holdings, Starbucks, Tesla, WiseTech Global, and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $420 calls on Adobe Inc., long March 2023 $120 calls on Apple, short January 2023 $92.50 puts on Starbucks, short January 2024 $430 calls on Adobe Inc., and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS, WiseTech Global, and Xero. The Motley Fool Australia has recommended Adobe Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Booking Holdings, Nvidia, PayPal Holdings, and Starbucks. 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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