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NASDAQ ETFs That Should Be In Your Portfolio

Hassan Maishera - January 30, 2020

The NASDAQ is one of the premier stock exchanges in the world. Some of the most valuable companies in the world trade on this exchange, including GoogleApple, and Microsoft. NASDAQ ETFs allow investors to hold the exchange’s top stocks without spending thousands to buy individual shares. The accessibility of ETFs, combined with the emergence of the US tech industry, makes NASDAQ ETFs some of the most popular holdings for retail investors.

Exchange-traded funds, also known as ETFs, are tradable securities that represent large funds with diversified holdings. ETFs have become a popular investment vehicle amongst investors from all parts of the world. The NASDAQ exchange includes some of the best tech stocks in the world, so NASDAQ ETFs are very valuable assets.

The Best NASDAQ ETF

Perhaps, one of the hardest things for investors is knowing what to look for in an asset. This is even more difficult because ETFs are comprised of several stocks or securities. However, to determine the best NASDAQ ETFs to trade, there are some things you have to look for.

Expense Ratio

The best NASDAQ ETFs have low expense ratios. Most of these funds are passively managed, and passive funds usually have low expense ratios. However, leveraged funds often have higher expenses. Investors should look for funds with lower expense ratios to maximize their returns.

Assets Under Management

Assets under management measure the total value of a fund’s holdings. Larger funds are usually more stable than smaller ones, and their shares usually trade with more volume and liquidity than their smaller counterparts. Investors should target larger funds because these are usually the most established and stable options.

Liquidity

Liquidity measures the demand for a particular asset. High liquidity stocks can be easily sold at a price that’s close to the market rate. However, traders often have difficulty exiting lower-liquidity stocks without taking a small loss from the bid-ask spread. As a result, highly liquid NASDAQ ETFs with tight bid-ask spreads are usually the best choice.

ETF for NASDAQ 100

Here are the top ETFs for NASDAQ 100.

Invesco QQQ (QQQ)

Invesco QQQ is one of the best NASDAQ 100 ETFs currently available to investors. The NASDAQ 100 tracks the 100 most extensive stocks on the NASDAQ stock exchange. The assets under management for this ETF is roughly $90 billion. Meanwhile, its expense ratio is 0.20%, making it very affordable to investors.

The ETF is highly liquid, as it has an average trading volume of over 20 million. Since this ETF only tracks NASDAQ stocks, it’ll be disproportionately impacted by tech news.

ProShares UltraPro Short QQQ ETF (SQQQ)

The SQQQ is another exchange-traded fund that tracks the NASDAQ 100 index. The index contains the largest stocks, both domestic and international that are listed on the exchange. The SQQQ uses an inverse-leveraged strategy, which means that the asset attempts to replicate the daily investment result opposite the daily performance of the underlying index.

The assets under management here are over $1 billion. However, its expense ratio is high, currently standing at $0.95%. With a yield of 3.36%, SQQQ is an interesting NASDAQ 100 ETF for investors to consider.

ProShares UltraPro (TQQQ)

The ProShares UltraPro is another large ETF that tracks the performance of the NASDAQ 100 index. The assets under management for this ETF currently stands above $4 billion. Meanwhile, its expense ratio is similar to that of the SQQQ, 0.95%. The TQQQ is highly liquid, as it records an average trading volume of 14 million.

TQQQ is a leveraged ETF, which means that it is best used for short-term trades. It’s not suitable as a buy-and-hold investment, so you shouldn’t buy it unless you’re an active trader.Nasdaq etfs

Equal Weight NASDAQ ETFs

Equal weight ETFs give the same importance or weight to each stock in a portfolio or index fund. In an equal-weight ETF, the smallest companies are given the same significance as the largest companies in the index. Equal weight ETFs sometimes offer higher returns because smaller companies sometimes grow at a faster rate than larger, more established firms.

First Trust NASDAQ 100 Equal Weight (QQEW)

The First Trust NASDAQ 100 Equal Weight is a leading NASDAQ ETF with nearly $1 billion in assets under management. The ETF has an expense ratio of around 0.6%, which is still high. The trading volume for the First Trust NASDAQ 100 Equal Weight is low, approximately 85,000 volumes.

The QQEW provides investors with an equal-weight exposure to the NASDAQ 100 index, which comprises of tech-focused, non-financial stocks. This ETF presents a good approach for investors who wish to get pure exposure to the non-financial sector with less concentration. The QQEW trades actively and has tight spreads.

Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE)

The QQQE is another equal weight ETF that tracks the NASDAQ 100 index. It weighs the stocks and balances them every quarter. At the moment, Direxion NASDAQ-100 Equal Weighted Index Shares has a net asset of $239 million. The ETF’s expense ratio is 0.35%, which is lower than what you would obtain on QQEW. The average trading volume is around 33,000.

Similar to the other NASDAQ ETFs, the QQQE majorly focuses on tech stocks (currently around 40%). This ETF is also a good option for investors who wish to have a broad-based large-cap exposure. Despite that, the weak yield of the Direxion NASDAQ-100 Equal Weighted Index Shares causes concerns amongst some investors.

Leveraged NASDAQ ETFs

A leveraged ETF is a security that amplifies the returns of an underlying index using financial derivatives and debt. Regular ETFs seek to mirror their underlying index, but leveraged ETFs aim to multiply movements by a 2:1 or 3:1 ratio. Leveraged funds can offer better returns than traditional ETFs. However, losses are also multiplied so these holdings have greater inherent risks.

NASDAQ ETF 3x

ProShares UltraPro (TQQQ)

The ProShares UltraPro has an asset under management of over $4 billion. The ETF seeks a return of 3x its underlying benchmark per day. Because of the compounding daily returns, the ETF’s returns over periods more extended than a day will vary in amount and sometimes in direction. Thus, the reason why it is best for intraday traders.

This ETF has an expense ratio of nearly 1%, which makes it expensive to manage. However, it is highly liquid with an average volume of 14 million shares traded per day on NASDAQ. As a leveraged ETF, ProShares UltraPro comes with additional risks for the traders.

ProShares UltraPro Short QQQ ETF (SQQQ)

The SQQQ is another NASDAQ ETF that seeks a return of -3x the return of its underlying benchmark per day. The compounding daily returns mean that the gains over a period longer than one day will vary in amount and possibly in the direction from the target.

Similar to the TQQQ, the expense ratio for this ETF currently stands at 0.95%. However, the assets under management are just a little above $1 billion. With a yield of 3.36%, SQQQ is a leveraged NASDAQ ETF that investors could consider.

Short NASDAQ ETFs

The short ETFs are those funds that use various derivatives to profit from the decline in the price of an underlying index. They are also known as inverse ETFs and investing in these types of ETFs is similar to holding various short positions in an index. Here are some Inverse NASDAQ ETFs to consider.

ProShares UltraPro Short QQQ ETF (SQQQ)

The UltraPro Short QQQ ETF seeks an inverse return of -3x the performance of its underlying index each day. This means that investors would get 3 times the gain when the price of the underlying index.

The expense ratio of this UltraPro Short QQQ is 0.95%, which is expensive even for the high leverage. The assets under management for this is just a little above $1 billion, and it has a yield of 3.36%,

ProShares Short QQQ (PSQ)

The ProShares Short QQQ seeks a yield of -1x return of its underlying index per day. It is also a large ETF as it has net assets worth over $500 million. The expense ratio here is similar to that of the SQQQ, 0.95%. However, it has a lower yield, 1.83%, compared to the SQQQ ETF.

As an inverse ETF, investors make returns when the price of the underlying index drops. However, due to its leverage, the ProShares Short QQQ is volatile, and investors could lose more when the price of the index moves in the positive direction.

ProShares UltraShort QQQ (QID)

QID is an inverse NASDAQ ETF that seeks -2x return on the yield of its underlying benchmark per day. The QID ETF has the same expense ratio as the other two above, 0.95%. However, its yield is slightly higher than that of the PSQ as it currently stands at 2.78%. The assets under management here are over $300 million.

With its inverse leverage of -2x, investors here make twice the profits when the price of the underlying index drops. However, because of its leverage, the ETF carries more risk as investors would lose more when the price of the index moves in the positive direction.

Reasons to Buy The NASDAQ

Over 40% of the NASDAQ is comprised of tech stocks including gig economy app stocks. The high concentration of tech stocks makes the NASDAQ very attractive. American tech stocks include some of the most valuable companies in the world, and the NASDAQ allows investors to get excellent exposure to these companies without breaking the bank.

NASDAQ ETFs: Closing Thoughts

If you’re ready to know more about NASDAQ ETFs, you should sign up for Stock Dork Alerts. We offer a steady stream of stock market news and analysis that will help keep you informed on everything happening in the world of Wall Street. Plus, our reports are written in plain English, so they’re easy to understand. Click here to join and claim your free 2020 Growth Guide now.

Hassan Maishera is a cryptocurrency expert and a Stock Dork freelance contibutor.

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