For investors who don't mind some volatility, Nasdaq exchange-traded funds (ETFs) have delivered impressive returns over the years. Nasdaq ETFs are exchange traded funds designed to follow some element of the Nasdaq index. The Nasdaq stock index had a rough 2022, as its value fell by 33%, but that was its worst year in recent memory. From January 2016 through January 2026, it gained more than 416%, compared to almost 260% for the S&P 500 during the same time period.
Top five Nasdaq ETFs to check out
The Nasdaq is heavy on tech stocks, but it also provides exposure to other market sectors as well. If you want an easy way to add this index to your portfolio, check out the five best Nasdaq ETFs below.
ETF | Net Assets | Expense Ratio | Description |
|---|---|---|---|
Invesco QQQ Trust (NASDAQ:QQQ) | $407.17 billion | 0.18% | Fund that tracks the Nasdaq-100. |
Fidelity Nasdaq Composite Index ETF (NASDAQ:ONEQ) | $9.32 billion | 0.21% | Fund that tracks the Nasdaq Composite Index. |
Direxion Nasdaq-100 Equal Weighted Index Shares (NYSEMKT:QQQE) | $1.22 billion | 0.35% | Equally weighted fund that tracks the Nasdaq-100. |
Invesco Nasdaq Next Gen 100 ETF (NASDAQ:QQQJ) | $799.81 million | 0.15% | Fund that tracks the Nasdaq Next Generation 100 Index, the next 100 largest companies after the Nasdaq-100. |
Invesco Nasdaq Internet ETF (NASDAQ:PNQI) | $765.4 million | 0.60% | Fund that tracks the Nasdaq CTA Internet Index, an index of internet-related businesses. |
1. Invesco QQQ Trust
NASDAQ: QQQ
Key Data Points
The most popular Nasdaq ETF is the Invesco QQQ Trust (QQQ -2.06%). It tracks the Nasdaq-100, an index of the 100 largest non-financial companies on the Nasdaq. As such, it's a tech-heavy ETF, with about half of its holdings in the information technology sector. Its largest holdings include:
- Nvidia (NVDA -3.47%)
- Apple (AAPL +2.23%)
- Microsoft (MSFT +1.53%)
- Amazon.com (AMZN -2.33%)
- Tesla (TSLA -4.01%)
- Meta Platforms (META -2.86%)
- Alphabet (GOOG -2.37%) (GOOGL -2.33%)
- Broadcom (AVGO -5.86%)
- Palantir Technologies (PLTR -13.27%)
The Invesco QQQ Trust has a reasonable 0.18% expense ratio. However, it's worth mentioning that Invesco launched a cheaper option, the Invesco Nasdaq-100 ETF (QQQM -2.21%), in 2020. It has a 0.15% expense ratio but far less liquidity. Long-term investors who don't expect to buy and sell often may want to go with the Invesco Nasdaq-100 ETF to save a little money on fees.
2. Fidelity Nasdaq Composite Index ETF
NASDAQ: ONEQ
Key Data Points
For broader exposure to the Nasdaq, the Fidelity Nasdaq Composite Index ETF (ONEQ -1.66%) is a great option. It holds more than 1,000 companies, with its largest positions being in Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, Tesla, and Meta Platforms. It normally invests at least 80% of its assets in common stocks included in the Nasdaq Composite Index.
The portfolio provides similar performance to the entire Nasdaq Composite index, and that has its pros and cons for investors. On the one hand, the Nasdaq-100 has typically outperformed the Nasdaq Composite Index, so returns may lag in bull markets. On the other hand, you get a much more diversified portfolio with this Fidelity fund. That's an advantage if you want more of a total Nasdaq fund instead of one that focuses on the top 100 companies.
3. Direxion Nasdaq-100 Equal Weighted Index Shares
Exchange-Traded Fund (ETF)
5. Invesco Nasdaq Internet ETF
Factors to consider before choosing a Nasdaq ETF
Buying any ETF means letting go of some control to a fund manager, but when choosing a Nasdaq ETF, it can be particularly risky because of the tech-heavy nature of the exchange. Here are a few factors to consider when choosing one (or more) to invest in:
- Index tracked. Not all Nasdaq ETFs will track the same thing. Some track the whole Nasdaq, while others may only track the Nasdaq-100 or some less common mix of industry stocks. Be sure you know what you're buying so you can check how closely your ETF is tracking the index behind it.
- Expense ratio. Every ETF has its own costs associated with it, including an expense ratio. This is typically better the lower it is, but always be sure the expense ratio allows for adequate profits rather than it consuming all your wins.
- Diversification. ETFs don't all contain the same stocks. The goal is to replicate the results of a particular index fund, not necessarily to hold everything within that index, so sometimes the stock blend can be very different than what you might expect. Know how well your fund is diversified and if it's weighted in a way you feel comfortable with.
- Replication method. Most U.S.-based ETFs will physically own the stocks they're using to replicate the results of their tracked index -- but not always. Make sure that you know if your ETF is using a physical (stocks are owned) or synthetic (derivatives are used) replication method.
- Dividend income. Does your ETF pay dividends or other types of income? It's important to know so you can figure this into how profitable it may be, as well as plan for any tax implications.
Should you invest in Nasdaq ETFs?
Nasdaq EFTs can be a great investment, especially for a buy-and-hold investor. However, they're not for everyone. Here are some reasons to choose them and some to avoid them.
Choose Nasdaq ETFs if:
- You have a high risk tolerance and can handle some downturns.
- You have time to make up losses, should things take a dip.
- You're interested in tech stocks, but need help choosing companies.
Avoid Nasdaq ETFs if:
- You can't afford to lose anything in your portfolio.
- You're risk-averse, and a drop in the index would spell emotional distress for you.
- You don't really care about tech stocks and are more interested in other industries.
There are many fine Nasdaq ETFs to choose from, but they all carry more risk than an S&P 500 ETF. Although the Nasdaq has shown significant gains over time, it can still have years that are dramatically down.
Future outlook for Nasdaq ETFs
Because the Nasdaq is a tech-heavy index, it's far more prone to volatility than the S&P 500, for example. But this also means that Nasdaq ETFs can be more diversified plays for larger gains, if you can tolerate the risks involved. With AI being a huge driver in the business world right now, a wide range of Nasdaq companies stand to benefit, from software companies to chip manufacturers.
However, others may be more at risk as the K-shaped economy takes its toll. Smaller tech companies in the Nasdaq could throw off the balance of Nasdaq ETFs, so keep an eye on what's in each ETF you're interested in buying and how those companies may be affected by changing consumer and business spending trends.
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FAQ
Best Nasdaq ETFs: FAQ
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