Best funds to invest in technology index

The Nasdaq stock exchange contains some of the most attractive investments in the stock market, including fast-growing technology names. Investors can own them all by purchasing a Nasdaq index fund, making it easy to own metrics like the 7 magnificent actions. But there are a wide variety of funds of this type and you need to be careful about what exactly you buy.

Here are some of the top Nasdaq exchange-traded funds (ETFs) and the key things you should look for.

6 Best Nasdaq ETFs

The funds below invest primarily in Nasdaq-100 Index, which includes the 100 largest non-financial stocks traded on the Nasdaq exchange – companies such as Apple, Amazon, Microsoft, Alphabet, Meta Platforms, Netflix and many others. Do not confuse this with Nasdaq Compositean index that includes all stocks traded on that exchange.

Other ETFs below include leveraged funds and short funds. Leveraged funds allowing investors to potentially achieve a higher return than that generated by the index itself. Short Funds allowing investors to bet against the index, allowing them to profit when the index falls. (Data as of May 13, 2024.)

Invesco QQQ Trust (QQQ)

This fund aims to mimic the Nasdaq-100 Index, although it has actually significantly outperformed that index.

Invesco Nasdaq 100 ETF (QQQM)

This fund – also from Invesco – also tracks the Nasdaq-100, but it does so at an even lower cost. The fund hasn’t been around for five years, but its three-year returns are comparable to QQQ.

ProShares UltraPro QQQ (TQQQ)

This leveraged fund uses derivatives to amplify the return of the Nasdaq-100, and it targets a daily return of three times this index. It also charges a healthier expense ratio for this benefit.

Direxion Nasdaq-100 Equal Weight ETF (QQQE)

This fund holds an equal weighting in Nasdaq-100 stocks rather than the typical weighting which is heavily tilted toward larger technology stocks.

ProShares UltraPro Short QQQ (SQQQ)

This fund increases as the Nasdaq-100 falls, allowing you short sell the index in a practical fund.

Fidelity Nasdaq Composite Index ETF (ONEQ)

This reasonably priced fund tracks the Nasdaq Composite (not the Nasdaq-100), so investors benefit from broader exposure to this broader index and less concentration on the biggest tech stocks.

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Risks of ETFs

ETFs can be an attractive way to invest in the market, allowing you to get the return of a specific index, but they do have drawbacks:

• Volatility: Just like individual actions, a stock ETF can be very volatile, although it tends to be less so than single stocks. You’ll need to understand that stocks can go anywhere in the short term and that you’ll need to hold them for years to enjoy the strong long-term returns.

• Monitoring risk: A fund that tracks a specific index may not accurately generate the returns of that index – this is called tracking risk. In the case of some of the funds above, this actually worked in investors’ favor, as the funds significantly outperformed their index. But it could just as easily work the other way, with the fund failing to meet its goal.

• Structural costs: Leveraged and short funds, by their very nature, incur additional costs because their derivative positions expire and must be reinstated regularly. These costs cause their returns to diminish over time, even if they perform well.

The Nasdaq-100 is a popular stock index, but investors have other popular choices, especially if they want broader diversification than just the top tech stocks. The most popular index is the Standard & Poor’s 500, which includes stocks in all major sectors. S&P 500 and Nasdaq-100 funds consistently rank among the best ETFsoffering high yields and low cost.

Conclusion

ETFs can allow you to invest in the Nasdaq Stock Index quickly and easily, providing a simple way to exploit the strong returns available there. But make sure you understand exactly what you’re buying and whether it fits your investment goals and risk tolerance. Work with one of best brokers for ETF investment for a wide range of features that can help you succeed.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Furthermore, investors are advised that past performance of investment products is not a guarantee of future price appreciation.

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