The exchange-traded fund (ETF) Betashares Nasdaq 100 ETF (ASX: NDQ) has delivered great returns over the long-term. But, investors may be questioning whether it's actually worth investing in at this level.
One of the best pieces of investment advice that helps investors outperform the market, in the long-term, is "be fearful when others are greedy and greedy when others are fearful".
As the above chart shows, the NDQ ETF reached an all-time high this week. It certainly doesn't seem as though investors are fearful about the companies within the NDQ ETF portfolio right now.
Yes, I'd much rather invest when the unit price was below $50 – significantly below where it is today – but we don't know if or when the unit price will get back to that level.
The question is – is it worth investing in today at this high valuation? I think investors should remember one key factor.
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Great businesses continue growing earnings
The NDQ ETF is invested in 100 of the largest non-financial businesses in the US.
The biggest positions in the portfolio include Nvidia, Alphabet, Apple, Microsoft, Amazon¸ Tesla and Micron Technology.
These businesses have collectively soared over the last few years, largely because they have grown their earnings as a group. The NDQ ETF has justified capital growth because the underlying companies are driving impressive financial progress.
As the chart below shows, the fund's unit price has increased by more than 100% in the past five years.
These businesses are regularly releasing new products and services, as well as implementing price rises on some products. New phones, devices, accessories, subscriptions – earnings have been driven by product developments and market share gains.
AI is one of the latest and biggest things the US tech giants are focused on. It's not quite clear how they're going to monetise AI to make a reasonable return on all of the expenditure on AI-related efforts.
If a company continues growing profit, it's very likely to send the share price higher. The business can grow into a valuation.
Final thoughts on the NDQ ETF
So, while it's true it's not cheap at an all-time high, it's also true that it has hit an all-time high numerous times over the last five years, as the chart below shows.
It has reached plenty of highs before and kept growing thanks to the quality of the businesses involved.
I think the same can continue over the long-term, so I'd be happy to invest in the NDQ ETF today, though I'd start with a small position following its 20% rise since the end of March, at the time of writing.
