Best Nasdaq ETFs | The Motley Fool (2024)

For investors who don't mind some volatility, Nasdaq exchange-traded funds (ETFs) have delivered impressive returns over the years. The Nasdaq stock index had a rough 2022, as its value fell by 33%, but that was its worst year in recent memory. From 2013 through 2022, it gained 247%, compared to 169% for the S&P 500.

Best Nasdaq ETFs | The Motley Fool (1)

Image source: Nasdaq.

Top Five Nasdaq ETFs to check out

Top Five Nasdaq ETFs to check out

The Nasdaq is heavy on tech stocks, but it also provides exposure to other market sectors, as well. If you want an easy way to add this index to your portfolio, check out the five best Nasdaq ETFs below.

Data source: Nasdaq.com. Data as of June 27, 2023.
ETFAssets under management (AUM)Expense RatioDescription
Invesco QQQ Trust (NASDAQ:QQQ)$189.9 billion0.20%Fund that tracks the Nasdaq-100.
Fidelity Nasdaq Composite Index ETF (NASDAQ:ONEQ)$4.8 billion0.21%Fund that tracks the Nasdaq Composite Index.
Direxion Nasdaq-100 Equal Weighted Index Shares (NASDAQ:QQQE)$646 million0.35%Equally weighted fund that tracks the Nasdaq-100.
Invesco Nasdaq Next Gen 100 ETF (NASDAQ:QQQJ)$739 million0.15%Fund that tracks the Nasdaq Next Generation 100 Index, the next 100 largest companies after the Nasdaq-100.
Invesco Nasdaq Internet ETF (NASDAQ:PNQI)$574 million0.60%Fund that tracks the Nasdaq CTA Internet Index, an index of internet-related businesses.

1. Invesco QQQ Trust

1. Invesco QQQ Trust

The most popular Nasdaq ETF is the Invesco QQQ Trust. It tracks the Nasdaq-100, an index of the 100 largest non-financial companies on the Nasdaq. As such, it's a tech-heavy ETF, with about half of its holdings in the information technology sector. Its largest holdings include:

  • Microsoft (MSFT -0.23%)
  • Apple (AAPL -0.9%)
  • Nvidia (NVDA -0.95%)
  • Amazon.com (AMZN 0.87%)
  • Tesla (TSLA 0.34%)
  • Alphabet (GOOGL 0.21%)

The Invesco QQQ Trust has a reasonable 0.20% expense ratio. However, it's worth mentioning that Invesco launched a cheaper option, the Invesco Nasdaq-100 ETF (QQQM -0.58%), in 2020. It has a 0.15% expense ratio but far less liquidity. Long-term investors who don't expect to buy and sell often may want to go with the Invesco Nasdaq-100 ETF to save a little money on fees.

2. Fidelity Nasdaq Composite Index ETF

2. Fidelity Nasdaq Composite Index ETF

For broader exposure to the Nasdaq, the Fidelity Nasdaq Composite Index ETF is a great option. It holds more than 1,000 companies, with its largest positions being in Apple, Microsoft, and Amazon. It normally invests at least 80% of assets in common stocks included in the Nasdaq Composite Index.

The portfolio provides similar performance to the entire Nasdaq Composite Index, and that has its pros and cons for investors. On the one hand, the Nasdaq-100 has typically outperformed the Nasdaq Composite Index, so returns may lag in bull markets.

On the other hand, you get a much more diversified portfolio with this Fidelity fund. That's an advantage if you want more of a total Nasdaq fund instead of one that focuses on the top 100 companies.

3. Direxion Nasdaq-100 Equal Weighted Index Shares

3. Direxion Nasdaq-100 Equal Weighted Index Shares

This ETF also invests in the Nasdaq-100 but with a twist. It provides equal-weight exposure to the Nasdaq-100, meaning it invests 1% of holdings in all 100 stocks. It rebalances on a quarterly basis to reset all holdings to 1%.

Most Nasdaq-100 ETFs, such as the Invesco QQQ Trust, are weighted by market cap. Even though they contain the same stocks as this fund, they're heavily invested in the index's largest companies. For example, the Invesco QQQ Trust has more than 20% of its holdings in just two companies.

That makes the Direxion Nasdaq-100 Equal Weighted Index Shares ETF a reasonable option if you want less risk. Because it's not reliant on any single company, it's less volatile than weighted funds. The downside is that it also doesn't provide quite as much growth potential since it won't be heavily invested in any big winners.

4. Invesco Nasdaq Next Gen 100 ETF

4. Invesco Nasdaq Next Gen 100 ETF

The Invesco Nasdaq Next Gen 100 ETF is based on an index of the next largest Nasdaq stocks after the top 100. It invests at least 90% of its assets in the 101st through the 200th largest companies on the Nasdaq. While other Nasdaq ETFs focus more on heavy hitters, this one includes more mid-cap stocks.

The ETF is heavily invested in information technology, but not as much as Nasdaq-100 funds. It has about 34% of its assets in the IT sector. Another notable difference is a much larger asset allocation in healthcare companies, which make up about 24% of the fund. It's also far more balanced; its top 10 stocks make up less than 20% of its holdings.

With an expense ratio of just 0.15%, the Invesco Nasdaq Next Gen 100 ETF is the cheapest fund on this list. It could be worth adding to your portfolio if you want exposure to different parts of the Nasdaq.

Definition Icon

Exchange-Traded Fund (ETF)

An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.

5. Invesco Nasdaq Internet ETF

5. Invesco Nasdaq Internet ETF

If you're interested specifically in internet-related companies, the Invesco Nasdaq Internet ETF is worth checking out. It normally invests at least 90% of its assets in stocks from the Nasdaq CTA Internet Index.

Unlike other funds on this list, the Invesco Nasdaq Internet ETF isn't made up exclusively of companies on the Nasdaq. It also has businesses that are listed on the New York Stock Exchange. Its five largest holdings, which make up more than 40% of its portfolio, are:

  • Amazon.com
  • Meta Platforms (META 0.24%)
  • Microsoft
  • Alphabet
  • Salesforce (CRM 0.33%)

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Should you invest in Nasdaq ETFs?

Should you invest in Nasdaq ETFs?

Nasdaq ETFs can be excellent options for long-term investors who want to maximize growth. Over time spans of five years and longer, the Nasdaq has generally done very well, and there have been many periods where it has outperformed the other major stock indexes.

If you want to invest in a Nasdaq ETF, there are several options available, and the main consideration is which specific index interests you. The biggest funds invest in the Nasdaq-100, and the Nasdaq Composite Index is another popular choice. But as you saw from the choices above, there are also other Nasdaq indexes that could be interesting.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Kristi Waterworth has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Salesforce, and Tesla. The Motley Fool has a disclosure policy.

As an investment enthusiast with a profound understanding of ETFs and financial markets, I've closely followed the trends and performance metrics of various exchange-traded funds (ETFs) over the years. My expertise extends to analyzing market indices like the Nasdaq, understanding investment strategies, and evaluating the underlying assets within ETF portfolios.

The article you provided delves into the realm of Nasdaq ETFs, highlighting their historical performance, key constituents, expense ratios, and investment strategies. Let's break down the concepts and components mentioned in the article:

  1. Nasdaq Exchange: The Nasdaq is a stock exchange known for its heavy concentration of technology companies, though it encompasses a broader range of sectors beyond tech.

  2. Exchange-Traded Funds (ETFs): ETFs are investment funds traded on stock exchanges, designed to track the performance of specific indices, sectors, commodities, or assets.

  3. Performance Metrics: The article discusses the historical performance of Nasdaq ETFs, citing data on returns and volatility over various periods, comparing them to other indices like the S&P 500.

  4. Top Nasdaq ETFs: The article lists several top Nasdaq ETFs along with their assets under management (AUM), expense ratios, and descriptions of the indices they track.

    a. Invesco QQQ Trust (QQQ): Tracks the Nasdaq-100 index, heavily concentrated in non-financial companies, particularly in the technology sector.

    b. Fidelity Nasdaq Composite Index ETF (ONEQ): Follows the Nasdaq Composite Index, providing exposure to a broad range of Nasdaq-listed companies.

    c. Direxion Nasdaq-100 Equal Weighted Index Shares (QQQE): Offers equally weighted exposure to the Nasdaq-100, rebalancing holdings quarterly.

    d. Invesco Nasdaq Next Gen 100 ETF (QQQJ): Tracks the Nasdaq Next Generation 100 Index, including companies ranked 101st to 200th in size on the Nasdaq.

    e. Invesco Nasdaq Internet ETF (PNQI): Focuses on internet-related businesses listed on the Nasdaq CTA Internet Index.

  5. Investment Strategies: The article discusses various investment strategies, such as diversification through broader indices like the Nasdaq Composite, equal-weighting of holdings, and focusing on specific sectors like technology or internet-related companies.

  6. Expense Ratios: Expense ratios represent the annual fees charged by ETF providers for managing the funds. Lower expense ratios are generally preferred by investors as they reduce the drag on returns.

  7. Considerations for Investors: The article addresses considerations for investors, including risk tolerance, growth potential, diversification, and expense management.

In conclusion, Nasdaq ETFs offer investors diverse options for gaining exposure to technology and other sectors listed on the Nasdaq exchange, with each ETF offering unique features and investment strategies tailored to different investor preferences and goals.

Best Nasdaq ETFs | The Motley Fool (2024)
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