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3 ways to play the Nasdaq with ETFs: Top Nasdaq funds

The Nasdaq stock index has seen impressive growth over the past decade, with an average annual increase of 14.2 percent. This has turned a $10,000 investment into over $37,700. For investors looking to capitalize on the Nasdaq’s success, exchange-traded funds (ETFs) provide a simple way to get involved.

Here are three ways to invest in the Nasdaq using ETFs:

1. Nasdaq index fund
One of the easiest ways to get exposure to the Nasdaq is through a Nasdaq index fund. These funds aim to mirror the performance of the Nasdaq-100 index, which consists of the top 100 non-financial stocks on the Nasdaq exchange. The Invesco QQQ Trust (QQQ) is a popular choice with an annual expense ratio of 0.20 percent. Another option is the Invesco Nasdaq 100 ETF (QQQM), which has a lower expense ratio of 0.15 percent.

2. Leveraged Nasdaq index fund
For investors seeking higher returns, a leveraged Nasdaq ETF may be a suitable option. These funds use derivatives to amplify returns. The ProShares UltraPro QQQ (TQQQ) aims for three times the daily performance of the Nasdaq-100 index. While it comes with a higher expense ratio of 0.88 percent, it has delivered an average annual return of 36.8 percent over the past decade.

3. Short Nasdaq index fund
Investors looking to profit from a decline in the Nasdaq index can consider a short ETF. These funds move inversely to the index, gaining value as the index falls. The ProShares UltraPro Short QQQ (SQQQ) targets three times the inverse daily performance of the Nasdaq-100 index. However, it’s important to note that the fund’s performance can be volatile due to the nature of its derivative holdings.

The Nasdaq-100 index comprises the 100 largest non-financial stocks on the Nasdaq exchange, including tech giants like Microsoft, Alphabet, Amazon, NVIDIA, and Apple. It serves as a benchmark for the tech sector’s performance.

While ETFs offer a convenient way to invest in the Nasdaq, they come with risks such as tracking error, structural costs, and volatility. Investors should consider their investment goals and risk tolerance before choosing a fund.

Overall, investors seeking exposure to the tech-heavy Nasdaq index can explore various ETF options based on their investment strategy. It’s essential to conduct thorough research and consider working with a reputable broker for ETF investing.

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