Are the Nasdaq-100 ETFs from Xtrackers and AXA IM any good?

[beerandjesus]

I'm looking to track Nadsaq-100 and justetf gives these four options from iShares, Invesco, Xtrackers, and AXA IM. The former two are bigger and have higher TER, but marginally worse performance. The latter two are younger but cheaper (still > 1 Y and > 400 M€). I couldn't find the tracking difference of them so don't know how to compare.

Which one would you recommend? The TER of the popular two are significantly higher so I'm a bit hesitant.

 

[koos99]

@beerandjesus I like Amundi/Lyxor but it looks like you do not want a synthetic ETF. Out of these I would probably pick Xtrackers or maybe Invesco if you really need a bigger fund, iShares is very expensive. AXA IM is cheap but new and I don't think I have ever seen any other ETF from them, the others are way more established and I would feel a bit safer with them.

 

[harley]

@beerandjesus The link only shows two ETFs for me? Can you post separate links for each ETF?

 

[beerandjesus]

@harley Weird. I see four. Maybe it's has to do with your location.

iShares Nasdaq 100 UCITS ETF (Acc)

Invesco EQQQ Nasdaq-100 UCITS ETF Acc

AXA IM Nasdaq 100 UCITS ETF USD Acc

Xtrackers Nasdaq 100 UCITS ETF 1C

 

[harley]

@beerandjesus (I didn't look at those links properly yet.)

If TER is significantly lower, and share price is lower (can be useful if you're e.g. investing a fixed amount each month) I would probably go for that one. Trading cost is another consideration, on Degiro for example certain ETFs are commission free.

 

[beerandjesus]

@harley So the smaller ones have TER ~0.2% and share price $35, while the large ones 0.3% and $870. For me there are no trading costs for saving plans so it doesn't make a difference.

 

[harley]

@beerandjesus Does your platform support fractional shares? If not, $870 is quite a chunky amount.

 

[beerandjesus]

@harley It does, so maybe share price doesn't matter that much in this case?

 

[beerandjesus]

Links:

iShares Nasdaq 100 UCITS ETF (Acc)

Invesco EQQQ Nasdaq-100 UCITS ETF Acc

AXA IM Nasdaq 100 UCITS ETF USD Acc

Xtrackers Nasdaq 100 UCITS ETF 1C

 

[larryzz]

@beerandjesus The lower performance is almost certainly due to the extra fees.

Nasdaq-100 ETFs are expensive; there is no way out of that. Even the US ones are expensive relative to the S&P500 ETFs. If you want Nasdaq-100 stick to either Invesco or iShares.

Else, If you want to consider an alternative, look for IUIT ETF. It's a pure tech ETF but with half the TER than the Nasdaq's

 

[beerandjesus]

@larryzz May I ask why you suggest Invesco and iShares, despite their lower performance? Simply because the other two are too young and small?

 

[larryzz]

@beerandjesus To help you better, can you please let me know your age, and will this be the only Etf you'll invest in? If multiple ETFs how much % of your money you intend to distribute between them?

 

[beerandjesus]

@larryzz Thanks!

I'm 26 and plan to invest €600 monthly, which will increase gradually. At the beginning 50% will go to VWCE for stability and the other half I want to go a bit riskier and Nasdaq-100 seems like a good choice for a higher return. I will likely hold onto both long term, only adjusting their monthly contribution when needed.

 

[larryzz]

@beerandjesus VWCE will be your fundamental ETF. The majority of your money should always go there and that's because VWCE or an SP500 ETF is the best balance of Risk & Return.

You should know though that a portfolio with 100% Stocks (no bonds) is considered high risk; for someone of your age, it is an acceptable level of risk. However 100% equities with 50% of those being in Nasdaq100 adds another layer of risk because Nasdaq100 ETFs are of higher volatility than VWCE and SP500 (high volatility means the ETF price swings down or up are much more). I would suggest you keep Nasdaq ETF not more than 30% of your allocation and the rest to VWCE.

Now on to the specific Nasdaq 100 ETF. AXA is not a big name for ETFs and hence I wouldn't trust it with half of my money. Xtrackers ETF is not liquid enough and hence the difference between the buy and sell prices is relatively bigger making it sometime pricier to buy.

If I would invest in a Nasdaq 100 ETF, Invesco would be my choice because they had a decade of success with their QQQ ETF in the US and their EQQQ in Europe is an exact replica with higher TER.

Good luck in your investment journey. Let me know if you have any other questions.

 

[beerandjesus]

@larryzz Thank you so much for your detailed answer. From VWCE to SP500 to Nasdaq 100 there is clearly a trend of increasing risk and return.

I do understand Nasdaq 100 being more volatile, but looking at their record in the past 10 years it still seems to be growing rapidly and (almost) steadily. That doesn't predict the future but it's something. Are you concerned that even in a timeframe of 5-10 years it might grow ultimately slower than VWCE or even go negative?

 

[larryzz]

@beerandjesus Investment teachers (Like Bogle, or Collins) taught us that for long term personal investment, the effective strategy is to invest in low cost broad market index funds and let the compound magic happen throughout the years.

Low cost broad market index funds are: S&P500, Total US stock market, or a global stock market.

The problem with Nasdaq based ETF is that it doesn't match the above description. It is not a broad market as it is only 100 companies and 50% of the total capital of those 100 are technology. So it is heavily tech focused and hence goes up and down with how well the tech sector goes. And that's where the volatility comes from.

Because of the high volatility, coupled with the high cost of the Nasdaq 100, you risk dragging down your portfolio compounding effect. I say "You risk" because there is a chance that Nasdaq will continue to outperform like it did in the past decade. But no one can guarantee that or not guarantee it won't go the other way badly. With the broad market funds, the risk is there, only a lot lesser.

It goes down to how much risk you are willing to do. You can play roulette with your portfolio and go all out on Nasdaq 100, or you can stay safe and do 100% VWCE, or even safer by 60% VWCE and 40% bonds. You have to research and learn about these risks so that you can take an informed decision with your investment portfolio.

I recommend you get yourself educated in personal investment. There is a book called "Simple Path to Wealth" by JL Collins. In my opinion, no one should start investing before they read this book. It has everything you need to know about investing. You just gotta watch out for the US specifics in the book that won't be applicable to you.

 

[brit218932]

@larryzz But seriously how big are the chances that technology would go down the coming years? It looks like with artificial intelligence and maybe even intelligent transportation in future, technology is just starting to take off. I don't think there is any chance in becoming give to ten years that technology would go down.

Does the Nasdaq 100 not include AI or electro cars?

 

[larryzz]

@brit218932 Common mistake is that we relate investing with technology

Can you name any more significant technology advancement in modern age than the Internet? When the internet hit mainstream, everyone poured their investment money on Internet companies. CISCO, which was and still is, the world's main provider for routers, switches, and networking equipment that makes a lot of the internet backbone, had their stock value drop 90% when the dot com bubble burst in early 2000s. CISCO's along with all those stocks that went crazy because everyone though "Technology = investment profit"

The Internet did go on to be the most technological advancement in recent human history; but its associated stocks didn't match that level of outbreak.

So my friend, be careful chasing AI or Electro Cars and stay diversified.

 

[brit218932]

@larryzz You named Internet and Cisco, but what about Amazon which is the biggest marketplace besides eBay. I don't know if eBay is in there though. Microsoft and Google, Nvidia and Intel the top notch in terms of conputational technology and they seem unrivaled for at least five to ten years if not even more. And it's still an index so when one doesn't perform well it drops out and a better one replaces it. The only company that stayed in the index since the nineties is Microsoft.

 

[beerandjesus]

@larryzz Thanks again for your answer and advice. I'll look into the book and the risks associated with Nasdaq-100.

Btw, just a small question regarding justetf: The performance charts they show already include TER, right? It says that on the website but I wanted to make sure.