Top 4 ETFs to Track the Nasdaq as of October 2018

If you’re an investor with a keen interest in technology, it’s only natural to take a look at exchange-traded funds (ETFs) that track the Nasdaq. The technology sector is historically volatile compared with the NYSE, and Nasdaq stocks exhibit about 35% more volatility. But volatility can also mean high growth potential and the accompanying financial reward.

In 2017, the Nasdaq Composite Index veered from returns of -14.45% in February to an ultimate year-to-date (YTD) return of 28%. So far, as of October 12, 2018, the Nasdaq Composite Index has returned 6.2%. With all that whipsawing, it’s certainly not for the faint of heart.

ETFs tracking the Nasdaq Composite offer investors exposure to the high-risk, high-reward technology sector while still hedging their bets with a more balanced approach. So if you’d rather not fiddle with individual stocks but still want the thrills of a tech-focused addition to your portfolio, take a look at these four Nasdaq-based ETFs.

Funds were selected based on a combination of performance, assets under management (AUM) and expense ratio. All figures were accurate as of October 12, 2018.

• Issuer: Invesco
• AUM: $74.1 billion
• 2018 YTD Performance: 19.95%
• Expense Ratio: 0.20%

Fondly known as “the Qubes” on the Street, Invesco’s QQQ trust is one of the oldest and most widely traded ETFs in the world. The fund tracks the Nasdaq 100, which is made up of the largest global non-financial companies listed on the market. Moreover, its internal rules skew it even more toward the technology sector, adding to its volatility. The information technology sector, for example, currently accounts for nearly 57% of the fund’s portfolio. The fund is weighted heavily toward large-cap growth companies (over 50%).

Despite its potential drawbacks, QQQ is an extremely inexpensive fund compared with its peers. Its one-year, three-year and five-year annualized returns are 28.72%, 23.40%, and 19.98%, respectively. 

• Issuer: Fidelity
• AUM: $1.86 billion
• 2018 YTD Performance: 17.14%
• Expense Ratio: 0.20%

Since its inception in 2003, this Fidelity ETF has attempted to replicate the Nasdaq Composite Index. Almost 93% of its holdings are common stock included in the index, and more than 97% of the assets represent domestic companies.

The fund is weighted toward information technology, healthcare, and consumer discretionary sectors, and you’ll see lots of familiar names — Apple Inc. (AAPL), Amazon.com, Inc. (AMZN) and Microsoft Corporation (MSFT) are the top three holdings. Its one-year, three-year and five-year annualized returns are 24.81%, 21.58%, and 17.62%, respectively.

• Issuer: BlackRock
• AUM: $9.79 billion
• 2018 YTD Performance: 14.40%
• Expense Ratio: 0.47%

Pharmaceuticals and biotech are extremely volatile sectors on an already capricious exchange, but where there is a risk, there’s a potential reward. If you want exposure to these forward-thinking companies, the iShares Biotech ETF is one of the most efficient and diverse funds available.

IBB’s top holdings are Gilead (GILD), Amgen (AMGN) and Biogen Inc. (BIIB). The top 10 holdings account for just over 56% of the fund’s portfolio. IBB’s one-year, three-year and five-year annualized returns are 9.98%, 6.68%, and 11.98%, respectively.

• Issuer: First Trust
• AUM: $2.62 billion
• 2018 YTD Performance: 10.90%
• Expense Ratio: 0.58%

This fund tracks the technology companies in the Nasdaq 100, with 90% of its assets in these companies. The fund’s top industries are semiconductors, software, and computers, which together account for over 80% of the fund’s portfolio. The top 10 holdings make up roughly 29% of the portfolio, with Check Point Software Technologies (CHKP), Qualcomm (QCOM) and Lam Research (LRCX) taking up the top 3 spots.

QTEC has a solid performance history, achieving one-year, three-year and five-year annualized returns of 17.39%, 27.67%, and 20.93%, respectively.