I believe the BetaShares Nasdaq 100 ETF (ASX: NDQ) is a wonderful exchange-traded fund (ETF) worth a spot in almost every ASX investor's long-term portfolio. It has performed exceptionally well for investors and I think it could continue to deliver pleasing long-term returns.
The Nasdaq is one of the main American stock exchanges on which many of the USA's leading tech-related businesses are listed.
The NDQ ETF tracks the performance of the NASDAQ-100 (NASDAQ: NDX), which houses 100 companies that are among the largest and most profitable businesses in the US. Many of these are global leaders in their fields.
Why is it such a good option for long-term investors? Let's look at three factors that make it so appealing in my view.
Great businesses
I believe the best types of companies to invest in are those likely to deliver compounding, long-term returns generated by their ability to grow profits.
These global winners often own products and services that resonate broadly across different types of customers across the world. More consumers or more subscribers then translates into stronger revenue and higher profits.
For example, businesses like Microsoft, Alphabet, Amazon, Apple, Nvidia, and Meta Platforms, which are among the biggest holdings in the NDQ ETF, have been highly successful at growing their operations and profits at tremendous rates.
The BetaShares Nasdaq 100 ETF has approximately 41.4% of its overall weighting invested in the above six tech giants. It's a great way to get investment exposure to all these tech titans with a single ASX holding.
To me, it's no surprise the NDQ ETF has returned an average of 22.5% per annum in the last five years, given the earnings growth rates these companies are still achieving, despite many years of strong growth already in the bag.
Consider for a moment all the technological changes constantly unfolding across smartphones, online video, virtual and augmented reality, cloud computing, artificial intelligence (AI), online retail, gaming, and more. The big US tech companies are at the forefront of all these trends.
Now, I'm not expecting the next five years to be as good as the last five years for the BetaShares Nasdaq 100 ETF, but I am still optimistic it can outperform the S&P/ASX 200 Index (ASX: XJO) in the long term.
Reasonable fee
Many fund managers offering exposure to a portfolio of this quality could charge management fees of up to 1% per annum.
The NDQ ETF has an annual management fee of 0.48%, which I regard as pretty fair. Plus, the BetaShares Nasdaq 100 ETF doesn't charge outperformance fees.
Overall, the fee structure is appealing and helps deliver good net returns.
Diversification
Whilst it is tech-focused, investors shouldn't just think of the NDQ ETF as a tech fund since it also invests in a range of other companies from different sectors. These sectors include financials, energy, utilities, materials, industrials, healthcare, and consumer staples.
These investments across alternative sectors can help offset some of the risks when big tech experiences any downturns. Some non-tech companies held by the BetaShares Nasdaq 100 ETF include Costco, T-Mobile, PepsiCo, Linde, Intuitive Surgical, Booking, and Honeywell.
Overall, I think there's a lot for ASX investors to like about the NDQ ETF.
