Investing in technology-focused exchange-traded funds (ETFs) offers a strategic way to capitalize on the dynamic tech sector. Among the myriad options available to Canadian investors, BMO NASDAQ 100 Equity Index ETF (TSX:ZNQ) stands out as a compelling choice. This ETF provides exposure to the NASDAQ-100 Index, encompassing 100 of the largest non-financial companies listed on the NASDAQ Stock Market.
That means instead of trying to buy up the Nasdaq or pick and choose what works, this ETF does the heavy lifting for you. So, let’s get into what makes this top tech ETF such a strong choice for both stability and growth on the TSX today.
Strong performance
As of writing, ZNQ ETF has demonstrated impressive performance metrics. The year-to-date return is 24.48%, with a one-year return of 39.19% and a three-year return of 12.70%. These figures underscore the ETF’s robust performance in recent years.
A significant advantage of ZNQ is its diversified exposure to leading technology companies. The top holdings include some of the top stocks on the market today. These include Apple at 9%, Microsoft at 8%, and NVIDIA at 7.7% at writing. This diversification mitigates company-specific risks. All while allowing investors to benefit from the growth of multiple tech giants.
But it’s not just these top stocks. Sector allocation within ZNQ is predominantly in technology at 51.65%, followed by communication services at 15.84% and consumer cyclical at 13%. This allocation aligns with the evolving landscape of the tech industry, capturing growth across various sub-sectors.
More benefits
There’s more to the dependency on tech stocks, though, for future growth opportunities. The ETF’s structure offers tax efficiency, a crucial consideration for Canadian investors. By holding U.S. equities within a Canadian-domiciled ETF, investors may benefit from favourable tax treatment on dividends and capital gains.
What’s more, there’s the cost. ZNQ maintains a competitive expense ratio, ensuring that investors retain a larger portion of their returns. This cost-effectiveness enhances the ETF’s appeal, particularly for long-term investors seeking to minimize fees. Recent market trends have further bolstered the attractiveness of ZNQ. The technology sector has exhibited resilience and growth, driven by advancements in artificial intelligence, cloud computing, and digital transformation initiatives across industries.
Furthermore, the ETF’s performance has been supported by strong earnings reports from its top holdings. Companies like Apple and Microsoft have reported robust revenue growth, reflecting their dominant positions in the tech market. These earnings reports continue to pour in this month as well, with Nvidia known for announcing near the end of earnings season. So, investors now could see quite a bump in the near future.
Bottom line
For investors seeking a balanced approach, ZNQ stock offers a blend of growth potential and stability. The inclusion of established tech companies alongside emerging innovators provides a comprehensive exposure to the sector’s dynamics. This tech ETF presents a compelling investment opportunity for those looking to capitalize on the growth of the technology sector. Its strong performance, diversified holdings, tax efficiency, and competitive cost structure make it a standout choice among Canadian tech ETFs.
