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When you’re investing in ETFs, you need to consider what types of ETFs you want to invest in. For those who are looking to invest in the market, one of the options is Nasdaq ETFs, and there are plenty to choose from.
How these ETFs are rated is based on different factors, including account sales, the fund's sustainability characteristics, relevant prospectus, MSCI ESG research, MSCI ESG fund ratings, MSCI ESG quality scores, and other ESG-related investment objectives.
About Nasdaq 100 ETFs
These types of ETFs have been around since 1985 and are Nasdaq stock market-based ETFs. The reason that many Canadian investors choose to invest in these types of ETFs is because these money market funds and mutual funds are the only way to invest in the Nasdaq 100. This is because you can’t invest in it directly, but it does track the fund's performance. Essentially, it works by purchasing some of the underlying stocks in the Nasdaq 100, but based on the weights they hold.
The thing about investing in ETFs and mutual funds is that these funds only seek to track the performance; sometimes, this isn’t the case. Sometimes, a “tracking error” can occur. That said, this error doesn’t have to be negative. While the fund can underperform what the Nasdaq 100 does, there’s also the opposite effect where the ETF overperforms, which means it does better than the Nasdaq 100.
ETFs to Choose From
When you’re choosing a Nasdaq ETF, you do want to be sure that you’re choosing the one that works best for you. That can be difficult, though, since there are so many different ones to choose from. Here are some of the best relevant indexes from leading providers.
BMO NASDAQ 100 Equity Hedged to CAD Index ETF (TSE:ZQQ)
This particular Nasdaq ETF cad hedged is what’s called a modified market capitalization weighted index and what it does is track 100 of the largest non-financial securities on the Nasdaq stock market. This fund specifically invests in such securities of the index and holds them how they are in the index. Because this is done in US dollars, it’s hedged back into Canadian funds. This means that the unit values are shown in Canadian dollars. Just like other investments, these values change frequently.
If you’re choosing to invest in the ZQQ index, it’s important to know that its risk rating is considered medium to high risk. Other key factors to note are:
| Current Closing Market Price | $138.66 |
| Current Closing NAV Price | $138.6178 |
| Current Net Assets | $2,043.17 M |
| Current Market Volume | 170,563 |
| Annualized Distribution Yield | 0.28% |
| Maximum Annual Management Fees | 0.35% |
| Management Expense Ratio | 0.39% |
iShares NASDAQ 100 Index ETF (CAD-Hedged) (TSE: XQQ)
This fund is similar to the fund above, which buys and holds funds in the underlying Nasdaq 100 index. That said, these funds in the underlying indexes are slightly different. Plus, unlike other stocks, this one doesn’t come in an unhedged version; however, it is also a medium high-risk fund. Here are some other facts about this stock.
| Current Closing Market Price | $49.87 |
| Current Closing NAV Price | $49.97 |
| Current Net Assets | $BB |
| Current Market Volume | 136,086 |
| Annualized Distribution Yield | 0.37% |
| Maximum Annual Management Fee | 0.35% |
| Management Expense Ratio | 0.39% |
Some of the popular holdings in this fund are:
- Apple Inc
- Microsoft Corp
- Nvidia Corp
- Broadcom Inc
- Amazon Com Inc
- Meta Platforms Inc Class A
- Tesla Inc
- Costco Wholesale Corp
- Alphabet Inc Class A
- Alphabet Inc Class C
Invesco NASDAQ 100 Index ETF – CAD hedged (TSE: QQC.F)
With the Invesco Nasdaq 100 Index ETF, there are three different possible indexes it could be investing in including the QQQ, QQQM and the securities of US companies. It does this to replicate the Nasdaq 100. How it works is it holds the 100 largest non-financial companies. This is decided based on market capitalization. Here are some other facts regarding this index.
| Current Closing Market Price | $157.31 |
| Current Closing NAV Price | $157.352 |
| Current Net Asset Value | $857,566,902.12 |
| Current Market Volume | 30,080.00 |
| Annualized Distribution Yield | 0.51% |
| Maximum Annual Management Fee | 0.20% |
| Management Expense Ratio | 0.20% |
Global X NASDAQ-100 Index Corporate Class ETF (TSE: HXQ)
This index, just like the others, seeks to replicate the Nasdaq 100 index. It includes 100 of the largest non-financial companies, both domestic and international. Here are the specifics of this fund.
| Current Closing Market Price | $76.78 |
| Current Closing NAV Price | $76.80 |
| Current Net Assets | $632.72M |
| Current Market Volume | 14.89 K |
| Annualized Distribution Yield | N/A |
| Maximum Annual Management Fee | 0.25% |
| Management Expense Ratio | 0.28% |
iShares NASDAQ 100 Index ETF (Unhedged) TSE: XQQU)
The reason that many investors choose this particular fund is that it is often used to diversify funds while not having any exposure to financial companies. It focuses on large capitalization US companies. It focuses on replicating the net expenses of the Nasdaq 100. Here are some of the other features.
| Current Closing Market Price | $64.01 |
| Current Closing NAV Price | $63.98 |
| Current Net Assets | $33,910,775 |
| Current Market Volume | N/A |
| Annualized Distribution Yield | 0.28% |
| Maximum Annual Management Fee | 0.35% |
| Management Expense Ratio | 0.39% |
BMO NASDAQ 100 Equity Index ETF (TSE:ZNQ)
The BMO Nasdaq 100 Equity Index ETF is similar to the other BMO ETFs, except it’s modified. Other than that, it’s still designed to track the Nasdaq 100 index. However, its stats are a little bit different. Let’s take a look.
| Current Closing Market Price | $86.82 |
| Current Closing NAV Price | $86.8026 |
| Current Net Assets | $928.01M |
| Current Market Volume | 24,672 |
| Annualized Distribution Yield | 0.29% |
| Maximum Annual Management Fee | 0.35% |
| Management Expense Ratio | 0.39% |
Vanguard Information Technology ETF (TSX: VGT)
Finally, another one to consider is the Vanguard Information Technology ETF. This particular ETF seeks to track the performance of the benchmark index of the information technology sector. It specifically tracks the investment return of these stocks. It’s passively managed and is known for including company stocks in the electronic industry and those that use the latest applied science to make their products. Like the other Nasdaq stocks, this one is considered to be high-risk.
| Current Closing Market Price | $577.42 |
| Current Closing NAV Price | $577.53 |
| Current Net Assets | $88.6B |
| Current Market Volume | 376,755 |
| Annualized Distribution Yield | 0.64% |
| Maximum Annual Management Fee | N/A |
| Management Expense Ratio | 0.10% |
QQQ and the Canadian Version
The Invesco QQQ stock is an American stock on the Nasdaq exchange, also referred to as the Nasdaq stock market. This fund doesn’t look to track the performance of the Nasdaq 100. What it does is maintain correspondence of the composition and weights of the securities as well as stocks on the Nasdaq 100 index. It’s actively managed, unlike some of the other funds; here are its stats.
| Current Closing Market Price | $483.03 |
| Current Closing NAV Price | $484.60 |
| Current Net Assets | 292,335,808 |
| Current Market Volume | 23,914,475 |
| Annualized Distribution Yield | 0.61% |
| Maximum Annual Management Fee | N/A |
| Management Expense Ratio | 0.20% |
If you’re looking for the Canadian version of this particular stock, then you’re looking for the Invesco NASDAQ 100 Index ETF – CAD hedged (TSE: QCC).
Comparing Nasdaq Stocks in Canada
When it comes to Canadian Nasdaq stocks, a good way to decide which one works best for you is by comparing them. We’re going to do this by taking some similar Nasdaq stocks and looking at the similarities and the differences. While we don’t have interactive charts, we do have insight into some of these stocks to help investors gain a different perspective.
TSE:ZNQ VS TSE:ZQQ
The first comparison we’re going to go over is the BMO Nasdaq 100 Equity Index ETF vs the BMO Nasdaq 100 Equity Hedged to Canadian Index. While we have gone over the basics for each ETF, let’s look a bit deeper including how well ESG factors rank for each one.
| Fund Stats | ZNQ | ZQQ |
| Distribution Frequency | Annually | Annually |
| MSCI ESG % Coverage | 99.58% | 98.59% |
| MSCI Peer Rank | 65 | 65 |
| Funds in Peer Group | 3,676 | 3,676 |
| Fund Lipper Global Classification | Equity US | Equity US |
| MSCI Low Carbon Transition Score | 6.50 | 6.50 |
| MSCI Weighted Average Carbon Intensity | 59.12 | 59.12 |
| MSCI Weighted Average Carbon Intensity % | 99.65% | 98.54% |
| MSCI Implied Temperature Rise | 2.20 C | 2.20 C |
| MSCI Implied Temperature | 99.65% | 98.54% |
TSE: QQC.F Vs TSE: HXQ
Another comparison that should also be considered is the Invesco Nasdaq 100 Index ETF QQC.F and the Global X Nasdaq 100 Index Corporate Class ETF. While these two ETFs do track the same index, they are slightly different. The first thing we notice, though, is that they’re both medium—to high-risk investments. However, the market price of the QQC is over double that of the HXQ. The HXQ has been around since 2016, whereas the QQC was only incepted in 2021.
Another difference between these two funds is the QQC, which is the Canadian equivalent of the QQQ, which is the index on the Nasdaq 100. Even though these ETFs both track similar funds, the QQC is the one you want if you wish to track the QQQ.
TSE: HXQ VS TSE: XQQ
If you’re looking at the Global X Nasdaq 100 Index Corporate Class ETF HXQ, then you should also look at how it compares to the iShares Nasdaq 100 ETF Index Cad-Hedged XQQ. The XQQ fund began trading in May 2011, whereas the HXQ fund began in April 2016, meaning that the XQQ is a little bit older.
When it comes to the market price of each fund, the XQQ is cheaper than the HXQ. You also have to consider that while each of these ETFs has similar holdings, their weights are different. Here, we identify companies that hold a large spot on these indexes. We include at least 10 securities to show the differences.
| Holding | HXQ Weight | XQQ Weight |
| Apple Inc | 9.02% | 8.88% |
| NVIDIA Corp | 7.36% | 7.36% |
| Amazon Com Inc | 5.14% | 5.25% |
| Tesla Inc | 2.97% | 3.12% |
| Alphabet Inc Class A | 2.48% | 2.45% |
| Microsoft Corp | 8.34% | 8.31% |
| Broadcom Inc | 5.28% | 5.34% |
| Meta Platforms Inc Class A | 5.05% | 5.06% |
| Costco Wholesale Corp | 2.68% | 2.71% |
| Alphabet Inc Class C | 2,39% | 2.35% |
Differences Between QQQ and QQC.F
We’ve already established that the QQQ is the Nasdaq 100 fund in the US, and the QQC is the Canadian equivalent. The QQC.F is a version of the QQC index. Those who invest in this index are looking to gain capital growth over time, gain exposure to US equities, be comfortable with medium to high-risk Canadian equities, and want exposure to foreign equity securities without fluctuations. With this type of investment, you should also be looking to diversify your investment portfolio.
Pros and Cons of Nasdaq ETFs
An important part of the process when looking into ETFs is figuring out what type of ETFs are best for you. There are plenty of low to medium-risk investments, whereas Nasdaq ETFs are medium to high risk investments. Here are the pros and cons.
Pros
When it comes to buying Nasdaq ETFs, there are plenty of reasons Canadian investors choose to invest in them. These include:
- High historical growth from historical data
- Low withholding taxes
- Efficiency
- Passive investing
When we look at the past performance of Nasdaq ETF, historically they outperform other investments on the market for extended periods of time. They also consistently show stronger than average growth. While this doesn’t mean your investment will succeed, it does give investors strong motivation to invest.
When you invest in Canadian ETFs that hold US stocks, your withholding taxes are lower. You’re old subject to 15% on the dividends. It’s also tax-efficient when it comes to income taxes payable because the stocks in the Nasdaq 100 rarely pay dividends, so there won’t be much to see on your official tax statements, which is why these ETFs don’t deter investors for tax purposes.
One of the best things about investing in Nasdaq 100 ETFs is that you’re essentially investing in 100 stocks at once instead of individual stocks. However, because these stocks are all managed together, you don’t have to actively manage each stock. It’s also cost-efficient because you’re only purchasing one instead of 100.
Cons
Just like with any type of investment, there are some cons to consider as well. These include:
- Volatility
- Sector concentration
- Market caps
- Fees
- Lack of international stocks
When it comes to volatility, these types of ETFs can be very volatile. This is because they invest in 100 stocks. While the market does tend to show these funds faring well, they have been known to plummet in a market crash. This happened last in 2008.
With the Nasdaq 100 ETFs, about half of the stocks are from the technology sector. It also has no exposure to financial stocks. This makes it more prone to prolonged market crashes and makes it much less stable. It has no small cap investments. All of the stocks are large market caps and only some mid caps. However, the small caps can be known to outperform in the market.
The MERs on Nasdaq 100 ETFs tend to be higher than others. Especially with those like US Equity ETFs such as the S&P 500. The Nasdaq 500 also lacks international stocks which affects the diversity of your portfolio.
Should You Invest in Nasdaq 100 ETFs
It’s hard to determine whether or not you should invest in Nasdaq 100 ETFs. These ETFs are medium-high risk, and whether or not you should invest depends on your financial situation as well as your investment portfolio. That said, if you want to invest in the Nasdaq 100, then it’s a good idea. The thing with any medium to high risk investment, though, is that you don’t want it to be the only investment that you have.
These types of ETFs are ideally used to diversify investment portfolios. They create a bit more risk while stabilizing the rest of your investments. While many of your low-risk investments have small earning potentials, your medium to high risk investments have more. However, it also makes a difference on which investment strategies you wish to use. There are many, including impact-focused investment strategies. If you’re unsure what the best investment strategy is for your investment objectives, then it could be a good idea to talk to a financial advisor and get their input on how to invest your money. They can look into other factors that might influence your decision, including:
- Fund documentation
- Fund expenses
- Fund’s gross weight
- Fund’s holdings date
- Funds investable universe
- The fund’s investment objective
- Fund’s investment strategy
- Fund’s prospectus
- Fund’s sustainable characteristics
- Fund’s tax year-end
- Fund’s valuation price
Financial advisors can also help you with other factors related to ETF purchases, such as the company’s specific business involvements, certain cash positions, benchmark indexes, business involvement metrics, global depositary receipts and more. They also have financial instruments that help predict the fund's future performance using the fund’s net assets as well as the fund's market value and other fund values. They can also help with different asset types and help you determine where the fund invests directly.
Final Thoughts
As you can see, there are plenty of different Canadian Nasdaq ETFs to choose from. Each of these funds tracks the Nasdaq a little differently so the cost of each of these varies. They all have slightly different stats as well. With that in mind, you can take a look at the history of each ETF and see which one works the best for you. However, you do need to keep in mind that these types of ETFs are riskier than others, they also have higher MERs.
When it comes to Nasdaq ETFs, investors use them to diversify their portfolios. These ETFs can offset some of your less risky investments and help stabilize your capital gains. It’s important to remember that a good portion of the Nasdaq 100 are stocks from the tech sector, and none of them are financial. This can make a difference based on what else is included in your portfolio.
Before you start investing in these kinds of ETFs, it’s important to weigh your options. Either way, though, they’re a good idea for those looking to invest in the Nasdaq 100 but are unable to since these are US stocks.
