Investing in the stock market needs dedicated time and research. Investing without knowledge is a way to lose your hard-earned money. For instance, buying the dip is a strategy, but not every dip is a buy. Similarly, accumulating shares over the years can help you gain from dollar cost averaging, but accumulating shares of a falling company could mean compounding your losses. The idea is not to make you fear investing but to build the right investing attitude. Using the above strategies efficiently can help you build strong returns. ETFs can be a good start, as you don’t need to study every stock in detail or monitor the stock market every year.
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Who should invest in ETFs?
ETFs, by design, pool investors’ money and replicate a stock market index. The index has certain rules, but are mostly a list of top-performing stocks that meet the investing criteria. These indices are rebalanced quarterly, where poor-performing stocks replace performing stocks. While the ETFs replicating these indices may not get you the underdogs that can make windfall gains, they can make you invest in well-performing companies that give returns. Even Warren Buffett has a small portion of his portfolio dedicated to ETFs, as they give market returns.
Why buy this ETF like there’s no tomorrow?
Now that you are sure you want to invest in ETFs, which one should you buy? There are market ETFs, but they are worth buying only when the market crashes, as you will benefit from a recovery rally. Earning only market returns won’t make you wealthy. You need an ETF that can beat the market. Consistently, the Nasdaq has housed the world’s most valuable companies. It has all the trillion-dollar market cap companies.
The iShares NASDAQ 100 Index ETF (CAD-Hedged) (TSX: XQQ) replicates the Nasdaq 100 Index. The ETF surged 26% after the March 2026 dip, while the Index surged 26.8%. The index has jumped 135% since January 2023, riding the artificial intelligence (AI) rally. The rally was driven by more than a 1,000% jump in the share price of companies like Nvidia, Broadcom, and Micron Technology.
When you see your $10,000 investment turn into $23,500, you automatically start building interest in stocks. You open the ETF factsheet in your email and see the key stocks driving the index returns. The factsheet states the top 10 holdings. Back in 2023, Nvidia and Micron were not among the ETF’s top five holdings, but today they command a 9.4% and 4% weightage, respectively.
The ETF keeps rebalancing, changing weightage as per the index. The better a stock performs, the more weightage it gets. There is no fund manager bias, but simple market dynamics are moving the tide. Think of it like paragliding. You go with the wind and have control of changing directions and landing through rebalancing.
Why this ETF is a long-term investment that you never sell
The historical performance of this ETF shows that its average annual return was 19% in the last 10 years. That’s a market-beating return. The past performance does not determine future returns. But if you look at the future, most technology stocks are reshaping our lives in many ways.
The upcoming trends of AI at the edge, robotics, self-driving cars, and space travel will be listed on Nasdaq. Nasdaq provides tech companies with a marketplace where investors have the appetite to take risks. That explains why Canadian tech companies like Shopify and Hive Digital Technologies are listed on Nasdaq. An ETF that replicates the performance of such a marketplace is worth holding for decades.
Tech doesn’t always go up. The 2022 tech meltdown even pulled the Nasdaq down. However, the downside was limited to 35%, and there was assurance of a market recovery, which an individual stock cannot provide. This makes the XQQ ETF ideal for both new and veteran, retired and young investors.
