Recession fears brought on by high inflation and rising interest rates pulled the Nasdaq Composite into a bear market in late 2021, and the index has yet to recover. In fact, the Nasdaq is still down 26%, and there is no guarantee the situation will improve anytime soon. Inflation remains elevated, interest rates will likely climb higher, and recent bank failures have added to the sense of economic uncertainty.
But investors can find confidence in one indisputable truth: The Nasdaq Composite has suffered more than a dozen bear markets since its inception in 1971, but has always recouped it losses. Every bear market has been followed by a bull market that eventually sent the Nasdaq soaring to new highs, and investors have no reason to think that pattern will change.
For that reason, the current drawdown is actually an opportunity to buy stocks, and one way to capitalize on the drawdown is to invest in the Nasdaq itself.
Here is one index fund with a perfect track record to buy now and hold forever.
NASDAQ: ONEQ
Key Data Points
How to invest in the Nasdaq Composite
The Fidelity Nasdaq Composite ETF (ONEQ +1.25%) measures the performance of the Nasdaq Composite, an index commonly seen as a benchmark for high-growth technology stocks. The reason for that is simple: The Fidelity exchange-traded fund comprises over 1,000 large-cap stocks that span all 11 market sectors, but it is heavily weighted toward growth stocks in the information technology sector.
The top 10 holdings in the Fidelity Nasdaq Composite ETF are:
- Apple: 12.6%
- Microsoft: 10%
- Alphabet: 5.8%
- Amazon: 5.2%
- Tesla: 3.5%
- Nvidia: 3%
- Meta Platforms: 2.1%
- Broadcom: 1.3%
- PepsiCo: 1.3%
- Costco Wholesale: 1.1%
The Fidelity Nasdaq Composite ETF can be quite volatile over short periods due to its highly concentrated nature, simply because its performance depends on a relatively small number of companies and market sectors.
Case in point: The 10 stocks detailed above account for more than 45% of its weighed exposure, and three sectors -- information technology, consumer discretionary, and communication services -- account for 70% of its weighted exposure. And those three sectors tend to perform poorly during periods of economic hardship. As a result, the Fidelity ETF has fallen far more sharply than the broader S&P 500 during the current bear market.
Yet the Fidelity ETF still has a perfect track record. Like its benchmark, it has recouped its losses from every past bear market, and there is no reason to expect a different outcome this time. In other words, patient investors are all but guaranteed to turn a profit if they hold the ETF long enough. But investors will likely do much better than a mere profit.
The Fidelity ETF has historically been a market-crushing machine. Over the last 15 years, the S&P 500 produced a total return of 303%, but the Fidelity ETF produced a total return of 502%, or 12.7% annually. At that pace, $150 invested weekly would grow into $141,000 in one decade, $609,000 in two decades, and $2.1 million in three decades.
As a final thought, the Fidelity ETF bears a below-average expense ratio of 0.21%, meaning investors would pay just $21 per year on a $10,000 portfolio. In other words, the Fidelity ETF is a cheap and easy way to gain exposure to growth stocks, which makes it an attractive option for risk-tolerant investors with a long time horizon.
