Australian investors have plenty of ASX ETFs offering exposure to the US share market. ETFs can spread risk across dozens or hundreds of companies, avoid the challenge of picking individual stocks, and often come with relatively low fees.
Two popular choices are BetaShares Nasdaq 100 ETF (ASX: NDQ) and iShares S&P 500 ETF (ASX: IVV). Both provide exposure to US equities, but they serve different purposes.
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NDQ: The growth-focused option
NDQ has around $9 billion in funds under management and tracks the NASDAQ-100 Index (NASDAQ: NDX), giving investors exposure to many of America's biggest technology and growth companies.
The appeal of this ASX ETF is straightforward: if US mega-cap technology and artificial intelligence stocks continue outperforming, NDQ could benefit disproportionately.
Its largest holdings include Nvidia, Apple, and Microsoft, giving investors significant exposure to some of the market's biggest growth engines.
But that concentration is also a risk. NDQ is less diversified than a broad-market ETF and can be more vulnerable if technology valuations fall or growth stocks fall out of favour.
The trade-off has been strong historical performance. NDQ has returned around 13% over one year, 6.5% year to date, and 442% over 10 years.
The downside? Investors pay a 0.48% management fee, considerably more than IVV.
IVV: The diversified alternative
IVV takes a broader approach, tracking the S&P 500 Index (SP: .INX), an index covering roughly 500 large US companies. It has around $14.5 billion in FUM, making it one of Australia's largest ASX ETFs.
There is significant overlap between IVV and NDQ, particularly among the mega-cap technology stocks. However, IVV also provides exposure to a much broader range of sectors and businesses.
That diversification is arguably IVV's biggest attraction. Investors still participate in the growth of companies such as Nvidia, Apple, and Microsoft, but aren't making quite as concentrated a bet on technology.
IVV has delivered around 8% over one year, 5% year to date, and 271% over 10 years.
Its other major advantage is cost. IVV charges just 0.04% a year, versus 0.48% for NDQ.
So, which ASX ETF is better?
It ultimately depends on what investors want.
NDQ could be the better choice for investors deliberately seeking higher exposure to US technology and growth stocks, and who are comfortable with greater concentration and volatility.
IVV looks more compelling as a core US equity holding, offering broader diversification and an exceptionally low fee.
For investors who simply want long-term exposure to the US market without making a concentrated technology bet, IVV could be the better all-round ASX ETF.
