Stocks In Focus: Betashares NASDAQ 100 ETF, July 23 2025

0:10G'day and welcome to Motley Fool Stocks in Focus, our series that goes right across the airwaves from the Motley Fool Money podcast to the Motley Fool Australia YouTube channel. Thank you for watching. Thank you for listening wherever this is finding you. Now, Stocks in Focus is the series that we basically pull apart, have a look at one large company. Maybe it's well-known, maybe it's widely held, maybe it's topical in the news. We're trying to bring you a bit of insight from the gun analysts here at the Motley Fool into these individual businesses or investments. In this case, this is not a business.

0:41This is a bit of a tip for you. Before we do start, though, two quick things. Firstly, monthly filing is general advice, not personal advice. In other words, you need to take what we say and determine for yourself whether it's right for you. We can't know that. So that's your job. If we give you that general advice, you can work out whether it's appropriate. Secondly, we're recording these things at a moment in time. Our views will change. Why? Because circumstances change. Maybe the opportunities, maybe the valuation, maybe something else in the environment or the circumstances. So again, as always, this is a point in time.

1:08Our team give you their views, but things change. So just keep that in mind. If you're watching this days, weeks, or months, or even years later, the internet is forever, of course, which will probably embarrass me in a few years' time, but that's where we find ourselves. So yeah, just keep that in mind. This has been recorded in June 2025. There you go. Chris, thank you for joining me. Thanks for chatting with me, Scott. Mate, I'm looking forward to this conversation for two reasons. One is because I own units in the investment you're going to talk about. But secondly, you run our Motley Fool Stars and Stripes service.

1:37Now, that picks companies out of the US in particular. This is an ASX listed investment, but it has a bit of US flavor. So you're very well suited to break this one down for us. We are, of course, talking about the NASDAQ ETF. It's a beta shares product and code is NDQ for those following along at home. Let's break it down, mate. What is an ETF and what is the NASDAQ ETF? Yeah, so an ETF, and I'll probably focus on an index ETF at this moment. So an exchange traded fund, it's a way essentially that investors can gain access to every stock. within an index in one easy trade. So in this case today, the BetaShares NASDAQ 100 ETF, this ETF tracks the performance of the largest 100 companies on the NASDAQ.

2:22And yeah, the list of companies on the NASDAQ are pretty impressive. So if I quickly read out the top 10 exposures within the portfolio now, they are Microsoft, NVIDIA, Apple, Amazon, Meta, which runs Facebook and Instagram, Broadcom, Alphabet, which includes Google, Tesla, Netflix, and Costco. Every company on this list is a company that has delivered some pretty spectacular growth over a number of years. So yes, it's a pretty impressive list. And through this one ETF, you can invest in all of these businesses. Now, I guess some things to think about for this ETF. It's got a 0.48 % management fee and fees are important, obviously because they eat into your return.

3:07This ETF will essentially, in other words, replicate the performance of the NASDAQ 100 minus the fees, essentially. So a few important things to know about the NASDAQ 100 is that the first, it excludes financial companies. It's very quickly a way it differentiates itself from other indexes like the S &P 500, for example, which includes essentially the largest 500 listed US companies. It's also very tech focused. So a very large proportion of the companies within the index are considered technology companies. So businesses like software companies, hardware companies, internet businesses, semiconductors, electronics, and those sorts of businesses.

3:49In fact, it's around 50 % or so of the sector allocation within the NASDAQ 100 is invested in information technology businesses. So this kind of exposure has meant that the growth rates have been very attractive for number of businesses. It also means that the index is a little bit more volatile as well. But yes, it's certainly been a fantastic investment for many investors over the last five, 10 years or so and beyond as well. Nice, mate. Now, you've kind of touched a little bit on some of the positives, but let's kind of be very specific about it. We talk about what is this investment, what is the ETF, and you've done that beautifully.

4:25Thank you. Let's talk about the pros. Why would an investor consider investing in the beta shares NASDAQ 100 ETF? So a big reason for investing in the ETF is diversification, right? So diversification in terms of you have exposure to many different companies all in the one investment. Diversification in terms of if you want to increase your exposure outside of just ASX listed companies, which is something that I think most investors should consider. Having exposure to one country can be a little bit more risky, of course. And of course, not only that, but the ASX index is largely made up of large banks and mining companies.

5:02So investing outside of just the ASX can help you diversify by industry as well. And many of the companies within the index are also global businesses. So even though it's a US exchange, the Nasdaq's a US exchange, it also includes a number of global companies and exposure to economies outside of the US and Australia as well. On industry, I think another key reason behind why people choose to invest in the NASDAQ 100 is its significant exposure to high-tech, innovative companies operating in markets we're expected to continue to grow at a strong rate for many years to come. Many of the largest companies in the index that I was listing out before are leading providers in some of the fastest growing industries.

5:49I think artificial intelligence, cloud computing, e-commerce, robotics, electric vehicles. Yeah, that's right. There's a lot of very large businesses that are dominant in some very attractive growing industries. I think another positive for the NASDAQ 100 comes down to its track record of performance. So if you graph the performance of the NASDAQ 100 index next to the ASX, next to the S &P 500, for example, as at the time we're having this conversation at least. The NASDAQ has outperformed the rest over a one-year, three-year, five-year, 10-year, and even 25-year time horizon. And by quite a substantial amount, sort of the more that you zoom the chart out.

6:32And if you believe, I guess, that the growth and innovation which has driven the returns of the NASDAQ over the past couple of decades is only going to continue and help these businesses become more and more important to us as consumers in the years to come, then that's a very good reason, I guess, to want exposure to this particular ETF as well. So, yeah, definitely a few positives for investing in this one. Yeah, plenty of positives there. Of course, past performance is no guarantee, as the league of legals would tell us. But at some point, when you see that sort of outperformance for that sort of period of time, you figure there might just be something to it.

7:04So, no guarantees, but you wouldn't rule it out. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

7:17Hey, let's go to the other side of the ledger then, mate. This is not, by the way, a formal recommendation. Chris is giving you the breakdown of this ETF, some of the pros and cons. I will ask him at the end whether he thinks it's going to be a market beta. We'll get to that one in a minute. But before we do, mate, what are some of the reasons investors might not consider the NASDAQ ETF or just the risks they might consider if they are going to invest? Yeah. So one risk is valuation. The NASDAQ has outperformed most other major indexes for a very long period of time and many of its largest holdings are growth companies that the market expects will continue to grow at an attractive rate for a while yet.

7:52And this means that the price that you have to pay per dollar of earnings is larger for the NASDAQ 100 than it is for other markets around the world. And there is, of course, the potential that these businesses don't live up to that expectations and returns can start to fall behind. Another negative about this ETF relative to other index ETFs is its fees are generally quite high. So with a management fee, it was around 0.48%. This is considerably higher than the 0.04 % fees that you can get in other major index ETF investments. This will eat into a return, so it's something to be wary of. It's still a much lower fee than what you'll pay for most actively managed funds or even many thematic type ETFs as well where you can invest in one particular trend or particular industry.

8:41But yeah, there are certainly also cheaper index ETF alternatives as well. So something to consider. I think there's also emerging risks as well around the US economy and market starting to close itself off a little bit from the rest of the world at the moment and making trade even harder, for example. And this could potentially have an impact on US businesses and US consumers and ultimately cause a bit of a drag on returns as well. This is a risk. How much of a risk? Well, that's very difficult to determine. I will say, though, there is a lot of US businesses which are very important to the daily lives of people and businesses around the world.

9:18And also, many of the world's most impactful innovations have come out of the US as well. And it's very difficult to see that not continuing to be the case well into the future. But there are rising risks here. Other risks to consider are currency. So the returns that you receive from this index will obviously depend on the returns from the individual companies within the NASDAQ 100. But on top of that, from an Australian investor's perspective, it's also influenced by the movement in currency between the US dollar relative to the Australian dollar as well. So if, for example, the US dollar depreciates, then the return that you will achieve will be less from an Australian dollar perspective.

9:59Now, of course, this can work the other way as well. If the US dollar appreciates, then from an Australian dollar perspective, our investment will be worth more. So certainly currency is a risk to consider. And I guess one other point is for investors who love dividends is that the dividend yield of the NASDAQ ETF is much smaller than what you can otherwise get from investing in an ASX index fund. And it also doesn't come with franking credits as well. So not quite as friendly from a dividend investor perspective as well, which is definitely worth consideration for those looking for income. Beautifully summarized.

10:33Thank you, sir. So they're the pros and the cons. Now, if it's an individual company, I'm going to say, well, is it going to beat the market? Now, to your point earlier, the NASDAQ ETF is the NASDAQ market, less those fees. So let's not talk about the NASDAQ. If you're an Australian investor, and I'm going to put currency aside on that, unless you want to answer it, because no one knows where currency is going and it tends to fluctuate around some sort of long-term average anyway. But let's talk about just the investment itself. If I say you've got five years, maybe five to 10 years, so we're long-term investors at the Motley Fool, five plus years.

10:59Do you reckon the NASDAQ ETF goes on to continue beating the Australian market? Yeah, I think over the long term, it probably will outperform the ASX. I think the major positions in the ASX are often in very competitive and highly commoditized markets and industries with limited growth expectations. The NASDAQ in comparison, I think over the longer term, we'll see its businesses generate much more compelling earnings growth rates as these businesses continue to innovate and play a major role in how consumers and businesses behave and spend. Over the near term, I don't have any high conviction.

11:34I would say there's a bit of a gap growing between the valuations of the NASDAQ 100 and the ASX, and that's continued to, I guess, widen in recent years, and I don't think that's sustainable. So, yeah, over the short term, I don't have any expectations of outperformance, but long-term, next five to 10 years, I expect the NASDAQ market will outperform the ASX. Beautiful. As someone who holds units in that particular ETF, I very much hope you're right, Chris. I think you might be too, just quietly. Mate, thank you for sharing your expertise with us. Thanks for breaking down the NASDAQ ETF. One of the more popular ones on the ASX.

12:09So maybe you've already owned it. Maybe you're thinking about it. Maybe you've never heard of it. In any case, I hope Chris has done a really good job, I think he has, of breaking it down for you so you know a little bit more about what your options might be when it comes to getting exposure to some of those really fast-growing, very impressive US technology businesses in particular. Mate, thanks again. Thanks for watching. Thanks for listening. Until we next speak or meet again, 4-1. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only.

12:36Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.