With the growing number of ETF offerings flooding the market, investors can often feel overwhelmed when selecting the right one. This article aims to empower you by demystifying the process of choosing an ETF and highlighting the crucial factors to consider before deciding.
What is the NASDAQ?
The NASDAQ (National Association of Securities Dealers Automated Quotations) is one of the most popular and dynamic stock exchanges in the world, home to a wide range of innovative companies, including technology giants like Microsoft, Amazon, and Tesla. Established in 1971 as an alternative to the New York Stock Exchange (NYSE), NASDAQ was created to trade stocks of high-growth technology companies.
Securities are traded electronically on various platforms on NASDAQ, allowing investors to buy and sell shares directly without an intermediary. NASDAQ also offers market information services and trading tools, making it one of the largest and most exciting stock exchanges globally.
History of the NASDAQ
- 1960: The SEC asks NASD to regulate the OTC market in the United States.
- 1971: NASD automates the market and creates NASDAQ.
- 1975: NASDAQ develops quotation standards and separates the shares of stronger companies from the OTC.
- 1982: The most powerful companies on NASDAQ split and create the NASDAQ National Market.
- 1991: NASDAQ stocks are recognized as equal to those traded on AMEX or NYSE.
- 1995-2000: Dotcom bubble leads to rapid growth, followed by a significant crash.
- 2020-2022: Covid bubble increases valuation of technology companies, followed by a significant correction due to inflationary tensions and rising interest rates.
NASDAQ Indices
NASDAQ 100
The NASDAQ 100 includes the 100 largest non-financial companies listed on NASDAQ, primarily from the technology sector. It measures the performance of these companies daily.
NASDAQ Composite
The NASDAQ Composite measures the performance of all stocks listed on NASDAQ. It is a broader index than the NASDAQ 100 and includes over 3,400 companies, making it one of the world’s largest stock indices.
NASDAQ Biotechnology
The NASDAQ Biotechnology Index includes leading companies in the biotechnology sector, ranging from pharmaceutical to food biotechnology, with a total capitalization exceeding two trillion dollars.
How to Invest in NASDAQ from the UK
Investing in NASDAQ from the UK is easier than ever. Here are the main ways to do so:
NASDAQ ETFs (Exchange-Traded Funds)
ETFs replicate the performance of specific stock indices like the NASDAQ Composite. They offer diversification, lower costs, and can be traded easily. Popular NASDAQ ETFs include:
- iShares NASDAQ 100 ETF (IQQ)
- Vanguard FTSE NASDAQ 100 ETF (VUSA)
- UBS ETF (UCITS) NASDAQ 100 (UCU1)
NASDAQ’s Individual Stocks
You can buy individual NASDAQ-listed stocks through brokers like eToro, Freetrade, and Interactive Brokers. These brokers offer access to a wide range of NASDAQ companies such as Microsoft, Amazon, and Apple.
Investment Funds
Indexed funds that replicate NASDAQ indices provide a diversified portfolio of stocks with lower fees than actively managed funds. These funds are ideal for investors seeking exposure to the entire NASDAQ market.
CFDs and Derivatives
Contracts for Difference (CFDs) and other derivatives offer exposure to NASDAQ price movements without owning the underlying assets. However, they come with higher risks due to leverage.
Invest in NASDAQ: Stock Picking or Buying NASDAQ Stocks
Steps to Acquiring NASDAQ Stocks in the UK:
- Stock Selection: Choose the stock or corporate bond you want to invest in. Conduct thorough research on the companies offering stocks on NASDAQ.
- Open a Brokerage Account: Select a trusted broker and open an account. Deposit the necessary funds to finance your investment.
- Buy and Sell Stocks: Once your account is funded, you are ready to buy and sell NASDAQ stocks.
Top Brokers for NASDAQ Stocks in the UK:
| Broker | Regulation | Commissions |
|---|---|---|
| Eightcap | Financial Conduct Authority (FCA) | No commissions |
| eToro | Financial Conduct Authority (FCA) | No commissions |
| Freetrade | Financial Conduct Authority (FCA) | No commissions |
| Interactive Brokers | Financial Conduct Authority (FCA) | $0.005 per share |
Examples of NASDAQ Companies:
- Software: Microsoft, SAP, Oracle, IBM, Symantec
- Hardware: Apple, Samsung, Cisco, HP
- Internet: Facebook, Google, Alphabet, Netflix
- Semiconductors: Intel, Qualcomm, Infineon Technologies
- E-commerce: Amazon, Paypal, eBay, Walmart, Shopify
- Biotechnology: Illumina, Gilead Sciences, Biogen, Pfizer
Investing in NASDAQ through ETFs
ETFs can offer better portfolio diversification for your investments. By investing in the NASDAQ through ETFs, you have the potential to gain exposure to a variety of financial assets in one place, reducing portfolio risk.
Popular NASDAQ ETFs:
| Name | Ticker | ISIN | Where to Buy |
|---|---|---|---|
| iShares NASDAQ 100 ETF | IQQ | IE00B3GX9Y84 | Hargreaves Lansdown, AJ Bell |
| Vanguard FTSE NASDAQ 100 ETF | VUSA | GB00B03MG735 | Hargreaves Lansdown, AJ Bell |
| UBS ETF (UCITS) NASDAQ 100 UCITS ETF | UCU1 | IE00B1XNHC37 | Hargreaves Lansdown, AJ Bell |
| Lyxor MSCI USA Technology Index ETF DR | LYX0 | FR0010477967 | Hargreaves Lansdown, AJ Bell |
Investing in NASDAQ through Investment Funds
Indexed funds that replicate the behavior of indices offer a simple way to invest in the entire NASDAQ market. These funds have lower fees than actively managed funds and provide a complete and diversified portfolio of stocks.
Investing in NASDAQ through CFDs or Derivatives
These financial products offer exposure to the price movements of the underlying assets without having to buy them directly. While they can increase your exposure to price movements, they also carry risks due to leverage.
Top Brokers for CFDs and Derivatives:
| Broker | Derivatives | Security | Commission |
|---|---|---|---|
| eToro | Yes | Stocks, ETFs, CFDs | 0% |
| InvestEngine | Yes | ETFs | £0.10 per trade |
| Interactive Investor | Yes | Stocks, ETFs, ISAs | £9.99 per month |
Top 10 Largest Companies on the NASDAQ
- Apple (AAPL) – 12.90%
- Microsoft (MSFT) – 12.14%
- Amazon (AMZN) – 6.64%
- NVIDIA (NVDA) – 4.87%
- Alphabet A (GOOGL) – 3.56%
- Alphabet C (GOOG) – 3.51%
- Tesla (TSLA) – less than 3%
- Meta Platforms (META) – less than 3%
- Costco (COST) – less than 3%
- PepsiCo (PEP) – less than 3%
Why Should You Invest in NASDAQ from the UK?
Growth Potential
NASDAQ is known for its high growth potential, especially in technology sectors such as cybersecurity, artificial intelligence, and biotechnology. These sectors have applications in transport, telecommunications, healthcare, financial services, and more, making NASDAQ a diverse investment option.
Sectoral Diversification
NASDAQ’s sectoral diversification allows investors to spread their risk across various industries. The index includes:
- Technology: 52%
- Discretionary Consumption (non-essential): 18%
- Health: 9%
- Industry: 5.49%
- Financial: 4.13%
- Telecommunications: 3.62%
- Basic Consumption: 3.33%
- Others: Less than 5%
Security
The NASDAQ is regulated by the SEC, which ensures transparency and disclosure. This regulation provides investors with financial security and minimizes the possibility of financial losses.
Liquidity
NASDAQ is highly liquid, allowing investors to buy and sell shares with ease. On an average day, more than 5 billion shares and $200 billion worth of trades take place.
Accessibility
Investing in NASDAQ is simple and convenient. Many brokers offer commission-free trading for American stocks, making it accessible for UK investors.
NASDAQ Holidays 2024
The NASDAQ closes on several occasions, typically coinciding with public holidays on the stock exchange calendar. Some examples include:
- 1st January (New Year’s Day)
- 15th January (Martin Luther King, Jr. Day)
- 19th February (Washington’s Birthday)
- 29th March (Good Friday)
- 27th May (Memorial Day)
- 19th June (Juneteenth National Independence Day)
- 4th July (Independence Day)
- 2nd September (Labour Day)
- 28th November (Thanksgiving Day)
- 25th December (Christmas Day)
Pros and Cons of Investing in NASDAQ from the UK
| PROS | CONS |
|---|---|
| ✅ Investment Offer: Stocks, ETFs, Bonds | ❌ High Volatility |
| ✅ Exceptional Transparency | ❌ Higher Risk |
| ✅ Possibility of Venture Capital | ❌ Possible Loss of Capital |
| ✅ Real-Time Operation | ❌ Currency Risk |
| ✅ Accessibility and Liquidity | ❌ Selective Liquidity |
Alternatives to Investing in NASDAQ
When you invest in NASDAQ, you are not just staking your funds with some of the world’s largest companies; you are also exposed to an index that is transparent, accessible, and has growth potential. However, investing carries risks, and you should only invest money you can afford to lose.
FAQs about investing in NASDAQ from the UK
The NASDAQ is a US stock exchange home to more technology companies, while the London Stock Exchange hosts a wider range of companies.
Market conditions, currency fluctuations, and political events can impact profitability.
Government bonds, high-quality corporate bonds, and money market funds are considered safer alternatives.