The BetaShares Nasdaq 100 ETF (ASX: NDQ) is one of the most popular exchange-traded funds (ETFs) on the ASX. In fact, according to the latest data, it is the sixth-most popular ETF for Australian investors, with close to $8 billion in assets under management.
NDQ is a fine ETF to be sure, and one that I used to own myself. It has delivered some shockingly high growth numbers in recent years to boot. So today, let's discuss two reasons why you might want to buy the Betashares Nasdaq 100 ETF, and one reason not to.
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2 reasons to buy the ASX's NDQ ETF
An investment in some of the world's best stocks
The Betashares Nasdaq 100 ETF simply represents an investment in some of the world's best companies. It is technically an index fund, holding the largest non-financial shares on the American NASDAQ stock exchange. The Nasdaq is the exchange that is famous for housing most of the top tech stocks in the US.
It counts Apple, Microsoft, NVIDIA, Alphabet, Meta Platforms, Tesla and Amazon – the Magnificent 7 – as its largest holdings for one. But it also houses plenty of other high-performing stocks, ranging from Netflix, Texas Instruments and Broadcom to Costco, Shopify and Booking Holdings.
It's a cross-section of the best tech companies the US has to offer. Given that the ASX is relatively light when it comes to tech, this can be particularly useful, not to mention lucrative, for Australian investors.
NDQ's ASX performance
As we touched on earlier, the ASX's NDQ fund has been an exceptional investment to have owned in recent years. As of 31 October, this fund has returned an average of 30.6% per annum over three years, and 20.4% per annum over the past five.
Since its May 2015 inception, NDQ unitholders have enjoyed an average return of 20.6% per annum.
Those are extraordinary numbers. Whilst past performance is never a guarantee of future results, no one can argue that NDQ's holdings haven't proven exceptionally gifted at rewarding shareholders up to this point.
So why not buy this ETF?
At first, and second glance, this ETF looks like a screaming buy for any ASX investor who doesn't have exposure to US tech stocks. Or just those who like ot invest in fast-growing stocks.
However, there is one reason why I think some ASX investors might want to look for alternatives. It's the price. NDQ is a high-quality ETF. But it charges a commensurate price. Investors pay a not-insignificant 0.48% per annum to have their money tied up in this fund.
Now, if you want this Nasdaq-specific exposure on the ASX, NDQ is basically your only choice. But it is not if you jump over to the US markets themselves.
These days, most ASX brokers offer cheap access to buying US stocks.
If you are willing to do that, you can get easy exposure to the Nasdaq for a vastly lower price compared to the ASX's NDQ. A popular choice is the Invesco QQQ Trust (NASDAQ: QQQ), which charges less than half of what NDQ does at just 0.2% per annum.
I myself go with the Schwab US Large-Cap Growth ETF (NYSE: SCHG). Although this ETF is not a Nasdaq-tracking index fund, it is very similar in its tech exposure, and shares all of NDQ's top holdings. I chose it for the minuscule management fee of 0.04% per annum.
Now, it's understandable that many ASX investors might want to keep things as simple as possible and stick with the ASX's NDQ ETF for their US tech exposure. And, judging by what the past ten years have delivered, that's probably not a bad way to go.
