Is it a good idea to invest in the NDQ ETF?

This ETF gives investors access to powerful global companies.

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Exchange-traded funds (ETFs) can make it much easier to invest in global companies from Australia.

The Betashares Nasdaq 100 ETF (ASX: NDQ) has become a popular choice for investors seeking long-term growth.

But does it deserve a place in a portfolio today?

Happy man and woman looking at the share price on a tablet.

Image source: Getty Images

What does the NDQ ETF own?

The NDQ ETF tracks the Nasdaq 100 Index, which includes 100 of the largest non-financial companies listed on the Nasdaq market.

Its holdings include businesses such as NVIDIA, Apple, Microsoft, and Tesla.

These companies sit behind many of the products and services people and businesses now rely on every day. The portfolio reaches across semiconductors, cloud computing, artificial intelligence, online shopping, digital advertising, streaming, software, and consumer technology.

I think that gives the Betashares Nasdaq 100 ETF a good chance of benefiting as more economic activity moves online and companies keep investing in technology.

The index also changes over time. Companies that grow can become more influential, while businesses that lose ground can shrink within the portfolio or eventually leave it.

That allows investors to back the Nasdaq's future leaders without needing to identify each winner in advance.

Why I like the long-term opportunity

Technology spending is becoming part of almost every industry.

Banks want better fraud detection, manufacturers want greater automation, healthcare providers need improved data systems, retailers want to understand customers more clearly, while companies across the economy are investing in artificial intelligence and cloud infrastructure.

Many of the Betashares Nasdaq 100 ETF's holdings provide the chips, software, platforms, and digital services supporting that investment.

The companies in the index also tend to have substantial global reach. Their growth is rarely limited to the US economy because they sell products and services to customers around the world.

That combination of innovation, scale, and global demand makes the ETF attractive to me as a long-term growth investment.

What should investors consider?

The Betashares Nasdaq 100 ETF is more concentrated than a broad global ETF.

Technology companies account for a large part of the portfolio, and several enormous businesses carry significant index weight. A difficult period for technology shares could therefore cause the ETF to fall sharply.

Valuation also deserves attention. Investors often pay high earnings multiples for companies expected to grow quickly. Those share prices can react badly when earnings disappoint or interest rate expectations change.

Australian investors also face currency movements because the ETF is unhedged. A stronger Australian dollar can reduce returns from US holdings when translated back into Australian dollars, while a weaker dollar can lift them.

The management fee and costs are currently 0.48% per annum. That is higher than some broad-market ETFs, although I think the focused exposure could justify the cost for investors who specifically want the Nasdaq 100.

I would hold the fund alongside other investments rather than rely on it as an entire portfolio.

My verdict

I think investing in the NDQ ETF is a good idea for investors with a long time horizon and enough tolerance for volatility.

The fund provides access to companies that could remain central to how the global economy develops over the next decade.

There will be periods when technology sentiment weakens and the ETF falls heavily. I would see those declines as part of owning a growth-focused investment.

Foolish takeaway

The NDQ ETF gives ASX investors a straightforward way to own many of the world's leading technology and consumer businesses.

Its concentration means the journey could be volatile, and I would balance it with broader Australian and international exposure.

For investors who can remain patient through market swings, I think the NDQ ETF is a strong long-term buy.

Motley Fool contributor Grace Alvino 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 Apple, BetaShares Nasdaq 100 ETF, Microsoft, Nvidia, and Tesla. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. 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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