NDQ: NASDAQ 100 Exchange Traded Fund

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This was the only way we could end our tech-tacular! After all that talk about the big tech companies and some of developments coming down the pipeline we wanted to showcase a way to get exposure to the sector. This exchange-traded fund is a great way to invest in those trends.

NDQ holds a basket of the 100 biggest non-financial stocks traded on the NASDAQ. The biggest companies held in the ETF are Apple (11.7% of the ETF), Microsoft (8.2%), Amazon (7.1%), Facebook (5.5%), Alphabet a.k.a Google Class C (4.9%), and Alphabet Class A (4.3%). Some of the other companies also held in the ETF include; Intel, Cisco, Adobe, Kraft-Heinz, Walgreens, Starbucks, Mondelez, PayPal, Netflix, Activision Blizzard, eBay, Marriott, Mattel and Tesla.

As you can see, whilst the NASDAQ is known as an exchange for technology stocks, there are a variety of different stocks traded on the exchange. However, the nature of ETF’s such as NDQ is that most of their price movement is driven by the larger holdings. For example, only 0.11% of the ETF is made up of Mattel shares, so even if the toy maker doubled in price it wouldn’t have a large effect on the overall value of the fund. In contrast if Apple, which makes up 11.7% of the fund, were to double in price then that would have a large effect on the funds value.

It is important to stress that we aren’t trying to time the market in our purchase of NDQ (Timing the market is when you buy close to the bottom and sell close to the top, maximising your profits). We see a fair bit of short term pain coming our way with our purchase of NDQ. However, this is an important example of investing with a long time horizon. We think over the long term the technology companies that make up the bulk of this fund – Apple, Amazon, Facebook and Alphabet – have bright futures and for that reason we think NDQ has a bright future as well. If anything, when a market correction comes in the next couple of years, we’ll probably double down on this decision and buy more NDQ.

 

To hear us discuss this stock of the week in more detail, and to hear our whole Tech-Tacular click here.

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