Must-know: NASDAQ ETFs offer better returns than growth stocks!



The technology sector in the U.S.

The United States has the most advanced software and information technology services industry in the world. There are more than 100,000 software and information technology service companies in the U.S. The industry draws on a highly educated and skilled U.S. workforce of nearly 2 million people. This workforce has continued to grow during the past decade.


Good returns over the years

Article continues below advertisement

The technology sector has seen healthy growth over the past five years, generating good returns for its investors. This trend has reflected in the performance of NASDAQ-listed tech-heavy exchange-traded funds like the PowerShares QQQ Trust, Series 1 ETF (QQQ), the iShares Russell 1000 Growth Index Fund (IWF), and the Vanguard Growth Index Fund (VUG).

The table above compares the performance of these ETFs. Keep in mind, though, that the tech sector has also had its dark days, like during the crash of the dot-com boom.

Industries that drove growth

Among these ETFs, QQQ has clearly outperformed in terms of returns. Apparently, QQQ has made a 57.23% allocation to technology stocks, compared to the 24.94% allocation by IWF and the 25.51% allocation by VUG.

The consumer cyclical industry is another industry where these ETFs have major allocations. QQQ, IWF, and VUG allocate 14.04%, 16.31%, and 17.35%, respectively, among this industry. The performance of consumer cyclical stocks—belonging to industries like automobiles, housing, entertainment, and retail—heavily relies on the business cycle and economic conditions. Companies like Amazon (AMZN) and Facebook (FB), belonging to the retail industry and the entertainment industry, respectively, are part of the top ten holdings of these ETFs.


More From Market Realist