Warren Buffett has long been touted as one of, if not the, greatest investors of all time. Although he has now stepped back from running his conglomerate Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B), Buffett has achieved immortality by securing an average return of 19.9% per annum between 1965 and 2024. That's almost double what the broader S&P 500 Index has managed over the same span (10.4% per annum). As such, it might surprise readers to learn that there is an ASX index fund on our own market that has topped even Buffett's average return over the past ten years.
That ASX index fund is none other than the BetaShares Nasdaq 100 ETF (ASX: NDQ). Yep, as of 31 July, NDQ units have delivered an average of 20.87% per annum over the preceding ten years. Since its inception in May of 2015, this index fund has averaged 19.32%.
Does that make NDQ the best index fund on the ASX? Perhaps even its best investment, period?
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How has this ASX ETF delivered Buffett-like returns for ten years?
Well, there's no denying that NDQ has been a phenomenal asset to have held for at least the past 16 years. A return of around 20% per annum is real wealth-building stuff. Just look at Buffett's net worth. But before declaring it the best investment on the ASX, let's go deeper into how it has delivered those returns.
At its core, the Betashares Nasdaq 100 ETF is a simple index fund that holds the largest 100 non-financial stocks listed on the American NASDAQ exchange. The NASDAQ is one of the USA's two major stock exchanges. The New York Stock Exchange is the historic, flagship market, holding some of America's most storied stocks. These include General Motors, Coca-Cola Co, Procter & Gamble, and Ford Motor Company.
The NASDAQ is the NYSE's hip younger cousin. It is more modern and has attracted many of the companies that first found success in more recent decades. That includes almost every major tech stock listed in the United States.
That's why NDQ's top holdings are dominated by tech. To illustrate, NDQ's current top-ten holdings are as follows:
- NVIDIA Corporation (NASDAQ: NVDA)
- Apple Inc (NASDAQ: AAPL)
- Microsoft Corporation (NASDAQ: MSFT)
- Micron Technology Inc (NASDAQ: MU)
- Amazon.com Inc (NASDAQ: AMZN)
- Advanced Micro Devices Inc (NASDAQ: AMD)
- Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL)
- Broadcom Inc (NASDAQ: AVGO)
- Tesla Inc (NASDAQ: TSLA)
- Meta Platforms Inc (NASDAQ: META)
As almost every investor under the sun knows, tech shares have been the driving force behind much of the US' incredible returns over the past decade or two. This ASX index fund holds the US' largest tech stocks at even higher concentrations than the broader market. That's why NDQ's returns have been so Buffett-esque of late.
Foolish takeaway
I think the Betashares Nasdaq 100 ETF will continue to be a solid investment going forward. Depending on how tech and AI continue to unfold, it could well keep up its returns going forward. However, investors need to be cautious. Many of NDQ's largest holdings are now in the trillion-dollar club. Whilst this highlights their success, it also places a significant handicap on their future growth potential. After all, it's a lot easier to go from a million-dollar company to a billion than from a billion to a trillion, and so forth.
Additionally, investors need to be aware that if sentiment turns on the tech sector, this ASX index fund could be hit hard, far harder than a fund covering the broader market.
Even so, it's hard not to conclude that the Betashares Nasdaq 100 ETF has been one of the best ASX investments to have owned for the past decade. Let's see if it can keep it up going forward.
