NASDAQ 100 index ETFs for non-US investors

Why NASDAQ 100 index ETFs?

• Diversification: The NASDAQ 100 index consists of 100 of the largest non-financial companies listed on the NASDAQ stock exchange. By investing in an ETF that tracks this index, you gain exposure to a diversified basket of stocks across various sectors such as technology, consumer discretionary, healthcare, and more. This diversification helps reduce the risk of investing in individual stocks.

• Focus on Technology and Growth Stocks: The NASDAQ 100 index is known for its heavy weighting in technology and growth-oriented companies. These companies often have strong growth potential and can outperform broader market indices during periods of technological innovation and economic expansion.

• Performance: Historically, the NASDAQ 100 has shown strong performance over the long term, driven by the growth of technology companies like Apple, Microsoft, Amazon, and Google (Alphabet). Investors seek exposure to these high-growth stocks through an ETF for potential capital appreciation.

• Liquidity and Accessibility: ETFs that track the NASDAQ 100 index are highly liquid, meaning they can be easily bought and sold on major stock exchanges throughout the trading day. This liquidity ensures that investors can enter and exit positions with relative ease, compared to investing directly in individual stocks.

• Lower Costs: ETFs generally have lower expense ratios compared to actively managed mutual funds. This cost efficiency can lead to better net returns for investors over the long term, as expenses eat into overall returns.

• Passive Investment Strategy: Investing in a NASDAQ 100 index ETF is a form of passive investing, where you are not actively selecting stocks but rather mirroring the performance of the index. This approach is attractive to investors who believe in the long-term growth potential of large-cap technology and growth stocks.

Drawbacks

• Sector Concentration Risk: The NASDAQ 100 index is heavily weighted towards technology stocks. As of a given time, a significant portion of the index’s value may be concentrated in a few large technology companies like Apple, Microsoft, and others. If these sectors or companies underperform or face regulatory challenges, it can negatively impact the performance of the ETF.

• Volatility: Technology and growth stocks, which dominate the NASDAQ 100, can be more volatile compared to other sectors or broader market indices. This volatility can lead to periods of significant price swings, which may be unsettling for some investors, especially those with a low risk tolerance.

• Market Risk: Like all equity investments, NASDAQ 100 index ETFs are subject to market risk. Factors such as economic downturns, geopolitical events, interest rate changes, or broader market corrections can affect the performance of the ETF negatively.

• Lack of Defensive Stocks: The NASDAQ 100 index primarily includes growth-oriented companies. It may lack exposure to defensive sectors such as utilities, consumer staples, and healthcare companies that tend to perform more steadily during economic downturns. This lack of diversification across defensive sectors can impact the ETF’s performance during market downturns.

• Currency Risk (for Non-US Investors): For non-US investors, investing in a NASDAQ 100 index ETF denominated in US dollars introduces currency risk. Fluctuations in the exchange rate between the investor’s local currency and the US dollar can affect the overall return on investment.

• Overvaluation Concerns: Some investors may worry that the NASDAQ 100 index, particularly its leading stocks, could become overvalued during periods of market exuberance. This could potentially lead to a correction or prolonged period of underperformance.

• Tracking Error: While ETFs aim to closely track their underlying index, there can be slight discrepancies known as tracking error. Factors such as fees, trading costs, and imperfect replication of the index constituents can contribute to this. Over time, these small differences can add up and affect the ETF’s performance relative to the index.

Top Holdings

Company	Weight
Apple	8.91%
Microsoft	8.49%
NVIDIA	7.72%
Broadcom	4.98%
Amazon.com	4.96%
Meta Platforms	4.30%
Tesla	3.12%
Alphabet A	2.71%
Alphabet C	2.61%
Costco	2.49%
Top 10	50.29%

ETFs

Here’s a list of accumulating NASDAQ 100 index ETFs listed on the London Stock Exchange. All are Ireland-domiciled, allowing them to benefit from a 15% US tax treaty rate on dividends, unlike the 30% rate for nonresident aliens from countries without a treaty.

Name	Ticker	Index	Provider	TER(%)	Size(USD mill)
iShares Nasdaq 100 UCITS ETF (Acc)	CNDX	NASDAQ 100	Black Rock	0.33	14,832
Xtrackers Nasdaq 100 UCITS ETF 1C	XNAS	NASDAQ 100	Xtrackers	0.20	771

Check the performance of the ETFs on Google Finance.