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.

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.

The post 2 reasons to buy the BetaShares Nasdaq 100 ETF (NDQ), and 1 not to appeared first on The Motley Fool Australia.

If you're investing in the long term, growth stocks can help you maximise your gains. They can offer superior gains to dividend stocks, which often prioritise making recurring payments over growing their operations at high rates.

The downside with growth stocks is that they can experience a lot of volatility from one year to the next. But if you're investing for not only years but decades, it can make a lot of sense to focus on growth stocks since over the long haul they're likely to outperform dividend stocks.

Rather than picking individual growth stocks, you may want to put money into an exchange-traded fund (ETF), which gives you broad exposure to many of them through just a single investment. Two popular options include the Invesco QQQ Trust (NASDAQ: QQQ), which tracks the Nasdaq-100 index, and the Vanguard S&P 500 Growth Index Fund ETF (NYSEMKT: VOOG) which focuses on growth companies within the S&P 500.

Which one is the better option for your portfolio today? Let's dive in and find out.

Over the past decade, the Invesco fund has delivered superior returns

Both of these funds have made for good, market-beating investments over the past 10 years. But by focusing on the Nasdaq-100, which includes the top non-financial stocks on the exchange, the Invesco fund has been the far better investment during that stretch.

QQQ Total Return Level data by YCharts.

There are many similarities between the two funds. Apple, Nvidia, and Microsoft make up the top three positions in both ETFs. However, in the Invesco fund they account for about 26% of the total holdings, versus 35% of the Vanguard fund. While the Invesco fund focuses on the Nasdaq 100, the Vanguard S&P 500 Growth Index Fund ETF has more than 230 stocks in total, making it a much more diverse option.

A potential slowdown in the markets could hurt both ETFs

The stock market has been red hot over the past couple of years, and the risk is that future returns may be limited. That can make both of these funds vulnerable to declines in the near term.

The Vanguard fund, due to its broader mix of stocks, may be less susceptible to a decline. But with more exposure to heavyweights such as Apple, Nvidia, and Microsoft, should those stocks struggle the most due to their high valuations, then the Invesco fund, which has less exposure to them, may be less vulnerable.

When looking at the long run, both of these funds can make for promising long-term investments regardless of short-term trends in the market. There is a lot of overlap between them. It may ultimately come down to how diverse an investment you are seeking and the exposure you want to tech.

Within the Vanguard fund, just under 50% of the holdings are in tech stocks, versus around 60% in the Invesco ETF. Tech stocks can sometimes generate far superior returns, but they can also be susceptible to big sell-offs, especially when their valuations soar to unsustainable levels.

For the long run, it's hard to go wrong with the Invesco ETF

The Invesco fund isn't as diverse as the Vanguard fund, which can be a disadvantage in the short run. But over the long haul, it's likely to outperform, because focusing on a narrower range of growth stocks can set it up for greater returns. Too much diversification can limit the returns an ETF can achieve.

While you don't necessarily want exposure to just a handful of stocks, which can increase your overall risk, I think the Invesco fund strikes a good balance. Its largest holding (Apple) only accounts for 9% of its entire portfolio. As long as you're OK with short-term volatility, the Invesco fund looks like it may remain the better investment option for the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post What's the better long-term investment: The Nasdaq-100 or the top S&P 500 growth stocks? appeared first on The Motley Fool Australia.