The Betashares Nasdaq 100 ETF (ASX: NDQ) is a leading exchange-traded fund (ETF) designed to give investors exposure to major US companies. Taking into account the various factors, I think this could be a good time to invest.
The NASDAQ is the stock exchange home to many of the biggest American companies that are part of our daily lives. As you can guess from the name of the ETF, this particular fund is invested in 100 of those businesses.
Of all the ETFs on the ASX, I think this could be one of the leading picks for a five-year investment. Let me explain what is attractive about it right now.
Strong businesses driving change and profit
When I look at this fund's biggest holdings, I see names like Apple, Microsoft, Nvidia, Amazon.com, Alphabet, Broadcom, Meta Platforms, Costco, and Netflix.
These businesses are some of the ones that have driven change in the past 20 years and adjusted what our daily life looks like.
Think of smartphones, computer software, AI, video streaming, social media, e-commerce, video gaming, cloud computing, and more – at least one of the above businesses is a global leader in that area.
With how these companies continue to roll out upgrades or entirely new products and services, I think there's plenty of scope for them to continue growing earnings for the foreseeable future as more of the world lives increasingly digital lives.
I view sustainable profit growth as the most important driver of long-term share price growth. These companies are collectively delivering that underlying growth for investors.
Weaker NDQ ETF valuation
Share prices change every day, but the NDQ ETF has been trending downward for the last few weeks, as the chart below shows.
Share markets don't regularly experience sizeable declines, partly because profits continue climbing. Businesses are usually growing their underlying value each year, so a fall in share prices is appealing to me when it happens.
While the current decline is only a few percentage points, I believe that it represents a buy-the-dip opportunity for investors.
It's true the fund has a high price-earnings (P/E) ratio, but I think that partly just reflects the fact that technology companies (which usually do have a high P/E ratio because of their growth and high profit margins) are a significant portion of the fund.
According to BetaShares, the NDQ ETF forward P/E ratio was 26.85x at the end of January 2025.
Reasonable diversification
This fund is weighted towards IT businesses (with a 50% allocation), which I think is a good thing due to the earnings growth those businesses are delivering. But, the fund is invested in other things too.
At the end of January 2025, four other sectors had a weighting of more than 5%: communication services (15.8%), consumer discretionary (15.1%), consumer staples (5.5%), and healthcare (5.2%). Some of these businesses still offer a significant technological focus even if they're in a different industry, such as the healthcare business Intuitive Surgical, which provides robotic equipment to help with surgeries.
Having 100 holdings is a decent level of diversification too, in my view.
Overall, the NDQ ETF has a number of pleasing positives, which is why I'd call it a long-term buy despite these volatile times.
