5 Best Nasdaq ETFs (Analyzed)

Investing
Updated: 9th Oct 2021
Written by Sean Graytok
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Vanguard Information Technology ETF (VGT) Analysis: Price History, Holdings, & Forecast
What is TQQQ? Definition & How to Use It
Investing
October 9, 2021
Written by Sean Graytok

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There are plenty of ways to get exposure to companies in the Nasdaq Composite Index — a basket of the best technology stocks on the market.

Here are the best Nasdaq ETFs for investing and day trading.

At a Glance: Best Nasdaq ETFs

  • Invesco QQQ (QQQ)
  • Invesco NASDAQ 100 ETF (QQQM)
  • Invesco NASDAQ Next Gen 100 ETF (QQQJ)
  • ProShares UltraPro QQQ (TQQQ)
  • ProShares UltraPro Short QQQ (SQQQ)

Best Nasdaq ETFs

#1. Invesco QQQ (QQQ)

QQQ is one of the most popular exchange-traded funds on the market. It contains the 103 largest companies in the Nasdaq, an index that holds over 2,500 stocks in total.

  • Performance over 1-Year: +29%
  • Expense Ratio: 0.20%
  • AUM: $184 billion

QQQ is commonly used as a technology stock trading vehicle given its high liquidity, allowing shorter-term investors to enter and exit positions quickly with little slippage.

The price for this liquidity is a 0.20% expense ratio, meaning you’ll pay $2 per $1,000 invested in QQQ. While it’s not 0.03% like some Vanguard funds, it’s still pretty negligible.

However, QQQ is popular amongst buy-and-hold investors too.

The Nasdaq-100 has outperformed the S&P 500 over the last two decades, and many individuals have turned to QQQ to capture that alpha.

QQQ Top Holdings:

#2. Invesco NASDAQ 100 ETF (QQQM)

Invesco launched QQQM in the past year, and it tracks the same exact companies that QQQ does — wait, what?

  • Performance over 1-Year: +23%
  • Expense Ratio: 0.15%
  • AUM: $2.0 billion

QQQM is called “mini QQQ” because it has the same holdings as its big brother, just fewer shares of them.

Invesco created this ETF for long-term investors seeking exposure to the top Nasdaq stocks.

They don’t need the liquidity of QQQ if they’re not planning to sell anytime soon.

In exchange for less liquidity, QQQM has lower fees than QQQ, charging 0.15% compared to 0.20%.

QQQM Top Holdings:

  • Apple (AAPL) 11.0%
  • Microsoft (MSFT) 10.3%
  • Alphabet (GOOG + GOOGL) 8.0%
  • Amazon.com (AMZN) 7.7%
  • Tesla (TSLA) 4.5%
  • Facebook (FB) 3.7%
  • Nvidia (NVDA) 3.7%
  • PayPal Holdings (PYPL) 2.2%
  • Netflix (NFLX) 2.0%

>> More: Top Stocks to Buy

#3. Invesco NASDAQ Next Gen 100 ETF (QQQJ)

Invesco is back with another way to gain exposure to Nasdaq companies. Let’s get to know QQQJ.

  • Performance over 1-Year: +25%
  • Expense Ratio: 0.15%
  • AUM: $1.15 billion

QQQJ invests in the 100th – 200th largest companies in the Nasdaq. This group of companies composes the Next Gen 100 Index.

Relative to the mega- and large-caps in QQQ, this ETF provides exposure to mid-cap tech stocks.

If they successfully grow large enough, these companies are “on deck” to be included in the Nasdaq-100.

About one out of three Next Gen 100 members end up being included in the Nasdaq-100.

QQQJ Top Holdings:

  • Fortinet (FTNT) 3.0%
  • Roku (ROKU) 2.3%
  • Zscaler (ZS) 2.2%
  • Datadog (DDOG) 2.1%
  • Old Dominion Freight (ODFL) 2.07%
  • MongoDB (MDB) 1.8%
  • Garmin (GRMN) 1.8%
  • Trade Desk (TTD) 1.8%
  • Zebra Technologies (ZBRA) 1.7%
  • Liberty Broadband (LBRDK) 1.6%

#4. ProShares UltraPro QQQ (TQQQ)

The ProShares UltraPro QQQ ETF is a levered fund that delivers 3X long exposure over a one-day trading period of Nasdaq-100 stocks.

  • Performance over 1-Year: N/A
  • Expense Ratio: 0.95%
  • AUM: 15.8 billion

TQQQ is used to day-trade the Nasdaq-1000 with leverage.

This means that if QQQ returns +2.00% in a single day, TQQQ will return +6.00%. The leverage works in the other direction, too.

The leverage and liquidity comes at a cost: an expense ratio of 0.95%.

However, most traders are willing to pay these fees because they’re optimizing for speed.

Traders using lower liquidity ETFs might end up paying more in bid/ask spreads anyways.

TQQQ will do some bizarre compounding if it’s held longer than one day.

#5. ProShares UltraPro Short QQQ (SQQQ)

SQQQ is the opposite of TQQQ — the ProShares UltraPro Short QQQ ETF is a levered fund that delivers 3X short exposure over a one-day trading period of Nasdaq-100 stocks.

  • Performance over 1-Year: N/A
  • Expense Ratio: 0.95%
  • AUM: $1.6 billion

Day traders expecting downside volatility in tech stocks might choose to buy SQQQ.

The high-growth technology stocks that make up the Nasdaq tend to rise faster and fall harder than the average stock.

Rumors of tapering or rising rates from the Federal Reserve could spook investors and cause them to sell their high-flying tech stocks.

Traders looking to benefit from this might turn to SQQQ for the day and profit from a pullback. And the leverage offered by ProShares allows them to profit three times over.

Just like TQQQ, this ETF is not designed to be held for more than one day.

Alternatives to Nasdaq ETFs

One of the main alternatives to Nasdaq ETFs, especially QQQ, happens to be the Vanguard Information Technology Index Fund ETF (VGT).

This Vanguard ETF provides very similar exposure to names in the Nasdaq-100, but with a lower expense ratio. However, VGT does not provide exposure to Amazon.

Another alternative to these technology-based funds is the ARK suite of ETFs, specifically the ARK Innovation ETF (ARKK).

ARKK invests in disruptive companies across a variety of industries. It tends to invest in mid-cap tech stocks that it believes can double in five years.

>> More: Join The Motley Fool Stock Advisor & see their top 10 stocks to buy right now.

Nasdaq ETF Frequently Asked Questions

What is the best ETF for Nasdaq?

The best ETF for Nasdaq is the Invesco QQQ ETF. It invests in the 100 largest companies in the index and has an expense ratio of 0.20%. QQQ has +$180 billion in AUM and is a highly liquid fund.

Which is better: QQQ or VGT?

We believe that QQQ is better than VGT in terms of being a technology ETF. The Invesco QQQ ETF invests in technology companies across several industries, from Amazon to Google and even Moderna. VGT invests in more traditional technology names.

Is QQQ a good ETF?

We believe that QQQ is a good ETF because it provides liquid exposure to the top technology stocks in the market. It has relatively fair fees and is generally regarded as one of the best funds on the market.

Bottom Line: Best Nasdaq ETFs

We recommend QQQM if you’re seeking exposure to Nasdaq companies and plan on holding the ETF for a long time. You don’t need the liquidity if you’re buying and holding, so you might as well save 0.05% in fees.

This article is for informational purposes only. It is not intended to be investment advice.

Sean Graytok
Sean Graytok
Sean is a student of the financial and technology industry. He is interested in the people and companies who are driving the innovation that will change our future.