Like the Nasdaq?Buy a good ETF.

 The NASDAQ Index here refers to the NASDAQ 100 which includes 100 non-financial U.S. companies.This compares to about 550 stocks in the TSX Index.And the NASDAQ 100 contains almost all of the large U.S.Technology companies.This includes Microsoft,Apple,Netflix and Nividia.Consequently the Nasdaq 100 is associated with growth and growth stocks.It's P/E ratio is currently around 30 which is thought of as being expensive relative to the TSX and the Nasdaq Composite Index..But as close as 2021, this ratio has been as high as 37. In other words the share price is 37 times the the current earnings.This compares to the TSX which has a P/E ratio of around 15 times.So, for Canadian investors you are buying a premium yet riskier stock on average than on the TSX.Many Canadian investors find investing in the Nasdaq 100 the perfect way to diversify their portfolio.However often the percentage of Nasdaq stocks in their portfolio is kept to less than 33%.Typically a Canadian portfolio that is topped up with Nasdaq 100 stocks outperforms one that has only stocks on the TSX.And the TSX is heavily weighted with commodity stocks which are also volatile.However these commodity stocks are cross-correlated with U.S.technology stocks.This makes for diversification of the portfolio. 

ETFs are Safer  

Many of the stocks on the Nasdaq 100 are expenmsive to buy and are volatile.So another way of participating is to buy an ETF (exchange traded fund) which may buy shares in 20 to 30 individual companies.One of the largest and most successful American ETFs is XLK which is called a technology spider. It owns 17 stocks and 3 make up about 50% of it's value,namely,Microsoft,Apple and Nividia.It has a market value of $65 billion and has moved up 25% in the last 6 months.But it has almost no dividend.A second American ETF is SMH,another spider,with net asset value of $18 billion.It has a broader spread of assets as it owns 16 stocks but the value is spread out equally over 10 stocks not 3.It showed a 20% gain over the last 6 months.

These American ETFs have had substantial gains over the last 6 months but are expensive to buy.There are Canadian alternatives to buy almost the same thing.The more popular ones are both BMO offerings --ZQQ and ZNQ.The price of a share is considerably lower.They are ETFs from the Nasdaq 100;ZQQ has almost the same% gain as the American ETFs but ZNQ is slightly lower.All have about the same P/E ratios of between 31 and 34.The Canadian ETFs (one owned by BMO(TEC), and one by CI Financial(TXF)) are much cheaper per share.In addition they have a slightly lower P/E ratio but one (TXF) has a  yield of 7.4%.

Conclusion

Over the last 3 years the Nasdaq has outperformed the other 3 large stock indices.And the Nasdaq 100 has outperformed the Nasdaq Composite.The ETFs capturing the Nasdaq 100 best and deliver the greatest capital gain over the last year are XLK and SMH.However they are also the most expensive.The next pair of good performing ETFs are Canadian equities.That is ZQQ and ZNQ and they have increased by almost 20% over the last 6 months.And they are fairly expensive also.ZNQ is a bargain because it is quite a bit cheaper and captured the same capital gain over the last 6 months.The last 2 ETFs we are looking at are quite a bit less expensive and have delivered almost the same return as the two more expensive Canadian ETFs.All of these ETFs own almost the same portfolio of stocks except for TXF;it bought small cap stocks.But of course TXF has equities and covered calls.So it has more income coming in from the covered calls and so offers it's investors a very good dividend.

                          ETFs that buy the Nasdaq definitely have a high return and this is a good way to top up your portfolio.The American ETFs have  the best return but are expensive.Many investors can increase their total return with less expensive ETFs.And TXF gives an adequate return and a very good yield. 

        ETF             Price/sh          Yield         P/E ratio    Net Aseets   

                               XLK            $200              .74%              34.0       $65B                              

                                        SMH            $218              .48%              34.5       $18B

                                        ZQQ             $125              .30%              31.8       $1.9B

                                        ZNQ             $78                .32%              31.8       $10M

                                        TEC              $35.30           .16%              34.9       $67M

                                        TXF              $20.38            7.25%           34.8        $31M

                                                                                                                                          a                            Dale Mcintyre is a freelance writer.                      http://ontarioteacherspensionplan.com/  https://www.zacks.com/