Up 20% in 2023 so far, is it too late to buy Betashares Nasdaq 100 ETF (NDQ) units?

US tech shares are performing well, here's why it could still be a good time to invest.

| More on:
A young man wearing glasses writes down his stock picks in his living room.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Betashares Nasdaq 100 ETF is invested in many of the leading tech companies
  • Inflation may have peaked in the US, following multiple interest rate hikes
  • I think the ETF still represents good long-term buying

The Betashares Nasdaq 100 ETF (ASX: NDQ) has done very well for investors since the beginning of the year, rising by 20%.

This has been a much stronger performance than the S&P/ASX 200 Index (ASX: XJO) which has only risen by 5.4% in the same time period.

When something goes up so strongly in such a short amount of time, it'd be understandable to question whether it's still good value.

But, I think it's worth saying that an investment can go up in price and be cheap, or perhaps go down in price and be expensive.

Let's remind ourselves that the Betashares Nasdaq 100 ETF is invested in 100 of the biggest businesses on the NASDAQ stock exchange, one of the main exchanges in North America.

Investors have probably heard of many of the biggest holdings within the exchange-traded fund (ETF) including Microsoft, Apple, Amazon.com, Alphabet (Google), Nvidia and Meta Platforms (Facebook).

Many of those names sank in 2022 as interest rates shot higher, hurting technology valuations in particular.

Why do interest rates (and inflation) matter?

Central banks around the world, including the Reserve Bank of Australia (RBA) and the US Federal Reserve, are trying to get in control of inflation. The tool the central banks are using to do this is interest rates.

Interest rates can have a huge impact on investment valuations. Warren Buffett once said:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature … its intrinsic valuation is 100% sensitive to interest rates.

The technology businesses have plenty of growth factored into their share prices, so it's understandable why they were hurt.

But, inflation may have peaked in the US, with inflation now only 5%. But, this may still be too high for the Federal Reserve.

Is this a good time to invest in the Betashares Nasdaq 100 ETF?

It clearly would have been a better time to invest in December 2022 at a lower price.

But, on a conventional metric like a price/earnings (P/E) ratio, it's certainly not cheap. According to BetaShares, the ETF had a forward P/E ratio of 23 times in February 2023.

Plenty of the businesses that it's invested in are among the world leaders at what they do, such as Apple, Alphabet, Microsoft, Costco, Intuitive Surgical and ASML.

I believe this group of businesses can continue to perform well as they re-invest in their operations, strengthen existing services and launch new products. Many of these businesses are working with a global addressable market, which gives them plenty of room to grow.

While it's not the cheapest time to invest, I think this ETF has a positive future ahead, so I'd be willing to invest at the current price.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ASML, Alphabet, Amazon.com, Apple, BetaShares Nasdaq 100 ETF, Costco Wholesale, Intuitive Surgical, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended ASML, Alphabet, Amazon.com, Apple, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

The letters ETF sit in orange on top of a chart with a magnifying glass held over the top of it
ETFs

3 of the best ASX ETFs to buy in December

Here are three funds to consider adding to your portfolio next month.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
ETFs

If I'd invested $5,000 in this ASX S&P 500 Index Fund 5 years ago, here's how much I'd have now

Would it have been a good idea to buy this ETF? Let's find out.

Read more »

Happy young woman saving money in a piggy bank.
ETFs

Did you know these ASX stocks are in the Vanguard Australian Shares Index ETF (VAS)?

The VAS ETF is an index fund that tracks the 300 biggest listed companies by market capitalisation.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
ETFs

5 excellent ASX ETFs for a $500 investment next month

If you have $500 available to invest in the share market, then the exchange traded funds (ETFs) in this article…

Read more »

The letters ETF with a man pointing at it.
ETFs

IOZ vs VAS: Which is the better ASX Australian shares ETF to buy right now?

These funds are both popular options. Which is better?

Read more »

a man wearing casual clothes fans a selection of Australian banknotes over his chin with an excited, widemouthed expression on his face.
ETFs

Buy these ASX ETFs for passive income in 2025

These ETFs could be used to generate passive income next year.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
ETFs

3 ASX ETFs to buy and hold for 10 years

Looking to make long term investments? Then check out these ETFs.

Read more »

ETF spelt out with a rising green arrow.
ETFs

Invest $5,000 into these ASX ETFs this week

These ETFs could be great options for investors with money to put into the market.

Read more »