I like to write about ETFs as I have the majority of my stock portfolio in ETFs I find them a passive way to invest money wisely and they don’t require much maintenance in terms of keeping track of stocks etc. For me, it is more of a set-and-forget approach instead of keeping track of all companies in a portfolio. In this article, we are looking at the Invesco EQQQ Nasdaq-100 UCITS ETF, and my personal review related to this ETF.
An exchange-traded fund is represented as a stock in the stock market so by holding this specific stock you are holding a basket of stocks that correspond to an index (portfolio benchmark) that it is tracking.
This is a growth-oriented ETF and its main goal is to track stocks from the Nasdaq exchange, at the time of writing is paying out a dividend yield of 0.49% which is not necessarily the highest. However, this ETF is not focused on providing income so a yield on its own won't tell us the full story therefore we need to look further into it.
The current benchmark/portfolio
The ETF currently includes 100 of the largest US and international non-financial securities listed on the NASDAQ Stock Market based on market capitalization. It reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade, and biotechnology. When it comes to geographical diversification, this ETF provides exposure mainly to US stocks (98%), which seems to be very limited at first but historically the United States has performed very well. One thing to note is while the exposure is limited to only US companies, many of these large companies have exposure and revenue around the world.
However, it cannot be denied that this ETF has limited exposure to companies outside the united states and it is a disadvantage.
When looking at ETFs I find it crucial to have a look at the top 10 holdings to get a good feeling of the ETF and to see if it fits my profile and to see if these would be companies I would invest myself in individually. In this case, the top 10 holdings are representing over 55% of the total holdings.
The top 10 holdings:
Apple Inc. - 13%
Microsoft Corp. - 12%
Amazon.com inc. - 7%
Nvidia Corp. - 5%
Alphabet Inc. Class A - 4%
Alphabet Inc. Class C - 4%
Meta Platforms Inc. - 4%
Tesla Inc. - 3%
Broadcom Inc - 2%
Pepsico Inc. - 2%
It is also important and interesting to look at sector diversification as it provides a good idea of how this fund is allocated through various sectors.
The top 5 sectors:
Technology - 49%
Communication Services - 17%
Consumer Discretionary- 15%
Health Care - 7%
Consumer Staples - 6%
Conclusion:
Overall, we can see that the holdings are quite concentrated. I like the exposure to these companies, however, they represent more than 55% of the total holdings, which is a lot, especially considering the top 2 positions. Looking at the sector diversification gives a better overview of the total composition of the ETF. For my personal taste, overall there is an excessive focus on technology and I find for my personal taste some lacking. However, this is a personal preference and for me, and for what I need this ETF to be it fulfills my goals.
Expense Ratio
When it comes to the expense ratio, the lower the better and I would generally like to see an expense ratio below 0.5%. Overall in Europe, I find the ETFs available a bit more expensive than what is available in the United States. In this case, this ETF has an expense ratio of 0.30% which is decent.
Performance
Since this is a growth-oriented ETF I want to look at the capital appreciation, as well as the dividend growth over the last couple of years. Purely looking at capital appreciation over the last 5 years this fund has increased by over 115% (distributed ETF) However, looking at a longer period this fund has performed better than this. I conclude that there was a decent appreciation in the stock price.
Pros
I find that there is quite a nice focus on companies that are innovative in this fund.
Secondly, since it is an ETF I find it a good way to set and forget and is quite passive in nature.
Thirdly, it has historically seen some excellent growth.
Fourthly, the top holdings are companies that I know and would like to have as part of my growth portfolio overall.
Cons
I find personally that the sector diversification doesn’t fully fit my taste, as there is some overallocation to companies and sectors, however for the way I use this ETF it is an excellent addition.
Secondly, this is an ETF mostly focused on the U.S. and therefore has no exposure to companies around the world
Thirdly, The top 10 holdings account for over 50% which wouldn't be ideal for a single ETF portfolio in my case.
Fourthly, as with all funds, it is not possible to choose the individual holdings so basically whether you like a stock or not in a fund, you are holding that stock indirectly, basically you are buying the winners and losers and trying to achieve a market return based on the index.
Conclusion
I currently hold this ETF in my portfolio as I way to boost my exposure to growth and innovative stocks and the top holdings are exactly what I am looking for in my portfolio to supplement, and I use it as a smaller holding in my portfolio and wouldn't consider it as a single ETF to hold due to my current risk profile and would rather choose something like the Vanguard All-World UCITS ETF Review (VWRL) which provides me with a similar profile to the S&P 500 but with more global exposure.
I want to tap into my stocks or dividends in over 20 years or so. It is to be noted, that this is not a dividend ETF, but a more growth-oriented ETF and needs to be looked at as such. That means that in my opinion focusing only on this ETF would not provide me with the best outcome that fits my goals.
Disclaimer: I am not a financial advisor, this blog is centered around my opinion and should not be viewed as legal, professional, or financial advice. For me, it's crucial to supplement my knowledge with resources like videos, articles, and books to deepen my understanding of investing principles and strategies.
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