Has Betashares Nasdaq 100 ETF been a good buy so far in FY23?

The Betashares Nasdaq 100 ETF (ASX: NDQ) is one of the most popular exchange traded funds (ETF) on the ASX, with $2.45 billion of investor money. But has it performed well this financial year?

First, let me tell you what an ETF is. It tracks the 100 largest non-financial companies on the NASDAQ.

The return earned by an ETF is determined by the return on the underlying businesses (or assets) in which it is invested.

For ETFs that invest in companies in different countries that are denominated in different currencies, exchange rate changes can also affect short-term returns. I’ll give a good example of this in a moment.

Performance of Betashares Nasdaq 100 ETF

In the three months to September 2022, the ETF is down 0.15%. That compares with the S&P/ASX 200 Index (ASX: XJO ), which fell 1.4%.

For an Australian investor, this is an outperformance of 1.25%.

However, I think it is worth noting that fact Nasdaq-100 index (INDEXNASDAQ: NDX ) was down 4.6% in dollar terms. This means that for Australian ETF investors, the fall in the Australian dollar against the US dollar has helped to offset the fall in the value of US shares in Australian dollar terms.

There was a lot volatility for the biggest names on the NASDAQ as inflation and higher interest rates hurt their valuations to a large extent technical and related to the company’s technology.

an apple, Microsoft, Alphabet, Amazon.com, Tesla, Metaplatforms and Nvidia are the biggest names in the portfolio, and all have seen big swings in their share prices in recent months.

What happens in October?

September ended the first quarter of the 2023 financial year in Australia.

But we already have a week of October.

Since the end of September, the Betashares Nasdaq 100 ETF is up 3.8%, while the ASX 200 is up 4.7%. To get the full picture, the Nasdaq-100 also rose 4.7% in dollar terms.

Why are interest rates so important?

Interest rates affect all sorts of things, such as mortgage rates, the cost of business debt, and so on. But it also hurts asset valuations. Legendary investor Warren Buffett once said this interest rates:

The value of every business, the value of a farm, the value of a home, the value of any economic asset is 100% dependent on interest rates because all you’re doing in investing is giving money to someone in exchange for what you expect the money to flow at over a period of time, and the higher the interest rate, the lower the present value. So every business by its very nature… its intrinsic valuation is 100% sensitive to interest rates.