The Nasdaq is officially in correction territory, with the Nasdaq-100 index about 13% below its recent high as of this writing. This has created some interesting opportunities for long-term investors, in terms of both individual stocks and exchange-traded funds (ETFs).
Of course, the largest and most popular Nasdaq-100 ETF is the Invesco QQQ ETF (QQQ 1.41%), which simply tracks the index. And there's absolutely nothing wrong with buying it on the dip. But I have my eye on two unique Nasdaq ETFs right now that I like even better.
A less concentrated version of the QQQ
There are two big reasons I don't own the Invesco QQQ ETF in my portfolio. One is concentration. Although there are 100 stocks in the Nasdaq-100 index it tracks, nearly half of the assets are concentrated in just nine companies. Simply put, if I wanted 9.7% of my money to be invested in Apple or about 8% in Microsoft, I would just buy shares of those stocks.
The second reason is that the largest stocks in the Invesco QQQ ETF are also (for the most part) the largest stocks in the S&P 500. I already own shares of the Vanguard S&P 500 ETF, which has a far lower expense ratio, so I'm happy to get my megacap exposure from there.
So, I'm taking a closer look at the Direxion Nasdaq-100 Equal Weight ETF (QQQE 1.27%). It invests in the same 100 stocks that the Invesco QQQ ETF does, but in equal proportion. In other words, every single company in the index makes up exactly 1% of the ETF's holdings. So, relatively small members of the Nasdaq-100 index like CoStar and Zscaler carry the same weight as companies like Apple and Microsoft.
NASDAQ: ZS
Key Data Points
In short, I think the Nasdaq-100 has been oversold and there's a long-term opportunity there. But I want to invest in all of the components, and not just have the largest few companies dictate how my investment performs.
A unique AI ETF
While I believe that artificial intelligence (AI) is a massive opportunity, analyzing AI stocks (especially smaller and niche companies) is admittedly outside of my wheelhouse. The problem with many AI ETFs is that their top holdings are the usual suspects, like Nvidia and Microsoft.
However, the Ark Autonomous Technology and Robotics ETF (ARKQ 1.81%) is different. This is an actively managed fund, not an index fund, run by notable tech investor Cathie Wood. It invests in a portfolio of stocks that should be major beneficiaries of the AI revolution, with 36 companies currently owned by the ETF.
My favorite part is that most of the top holdings are companies I'm not too familiar with and don't already have significant investments in via other ETFs. While a couple of the top holdings are household names (Tesla is the No. 2 position, for example), companies like Kratos Defense and Security, Teradyne, and Iridium Communications make up a lot of the fund's assets.
I recently opened a small position in this ETF to add some much-needed AI exposure to my portfolio, and since it has fallen by about 23% from its January high, I'm planning to add shares to take advantage of the dip.
Buy for the long term
To be clear, I have absolutely no idea if the market volatility will calm down anytime soon. If the trade war escalates, or if the U.S. economy falls into recession, it's entirely possible both of these ETFs could fall further. But with both in correction territory right now, I'm quite confident that regardless of what happens in the near term, both will be worth substantially more in a few years than they are today.
