Is the NDQ ETF a no-brainer buy right now?

Woman sits at computer in a quandary with hands at side of head

Woman sits at computer in a quandary with hands at side of head

These are two metrics that might sugggest that the BetaShares NASDAQ 100 ETF (ASX: NDQ) is a no-brainer buy for a long-term investor’s share portfolio today.

The first is its long-term performance record. Over the past five years, this exchange traded fund (ETF) has delivered an impressive average return of 18.22% per annum. Since its inception in May 2015, NDQ has averaged 16.6% per annum.

Considering an ASX-based index fund like the Vanguard Australian Shares Index ETF (ASX: VAS) has averaged just 6.88% per annum over the past five years, NDQ investors might feel rather grateful they had branched out from ASX shares over the timeframe.

The second metric is the steep drop NDQ units have suffered over 2022 thus far. It has been a rather brutal year to date for the BetaShares NASDAQ 100 ETF. Between 1 January and 30 June 2022, NDQ units have lost a painful 25.4%.

So we have a long-term performer that has just suffered a major dip. Some investors might see the perfect mix here for a ‘buy the dip’ opportunity. But is it as simple as that?

Is it buy the dip time for the NASDAQ 100 ETF?

The NASDAQ 100 ETF is an index fund at the end of the day. It covers the 100 largest shares on the US Nasdaq Composite (INDEXNASDAQ: .IXIC). Yes, the NASDAQ has had a golden decade of sorts, driven largely by the stellar returns of the FAANG stocks such as Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), and Aphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL).

But we have seen periods of immense returns for the NASDAQ before. Between March 1992 and March 2000, the NASDAQ appreciated by more than 700%. That’s almost twice the gain that the NASDAQ experienced over the eight years to November 2021.

But here’s what investors should remember. The NASDAQ also lost around 75% of its value between March 2000 and March 2003. It would take until March 2015 for the NASDAQ to recover to the heights we saw in the dot-com peak of March 2000.

I’m not suggesting this will happen again. But what I am suggesting is that an investment can look like a no-brainer if we look at a five-year performance chart. But it’s only after we zoom out and get the fuller picture that past patterns can really be appreciated.

There is one big difference between 2000 and today though. Back in 2000, the NASDAQ was full of companies that had yet to become profitable. Today, the NASDAQ is dominated by some of the most profitable companies in the world. For that reason, I still think the BetaSahres NASDAQ 100 ETF is a no-brainer buy today for a long-term investor.

The post Is the NDQ ETF a no-brainer buy right now? appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet (A shares), Amazon, and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and BETANASDAQ ETF UNITS. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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