Exchange-traded funds (ETFs) are a simple way for Australians to invest in global markets. Many investors see iShares Core S&P 500 ETF (IVV) and BetaShares Nasdaq 100 ETF (NDQ) as standouts. IVV gives you access to the S&P 500, which includes some of the biggest companies in the US. NDQ, by contras, focuses on the Nasdaq-100, famous for tech heavyweights like Apple and Microsoft.

Which one is right for you? Well, that depends on what you’re looking for. Both have their strengths and risks, so it’s worth understanding how they differ. In this article, we’ll break down the key features of IVV and NDQ to help you figure out which might suit your strategy.

Overview of iShares Core S&P 500 ETF (IVV)

IVV is an ETF by iShares that tracks the S&P 500 index , one of the most widely recognised benchmarks. It offers exposure to 500 large companies across various industries in the United States (US), providing broad diversification.

The ETF includes sectors like technology, healthcare, financials, and consumer goods – balancing growth and stability in its holdings.

Investing in IVV allows Australians to access the US market through the Australian Securities Exchange (ASX) , making it convenient for local investors. With its focus on well-established companies, IVV can appeal to those seeking diversified exposure to the US share market .

Overview of BetaShares Nasdaq 100 ETF (NDQ)

NDQ is an ETF by BetaShares that tracks the Nasdaq-100 index , focusing on 100 major non-financial companies.

The index is heavily weighted toward technology, including well-known names like Apple, Amazon, and Microsoft. NDQ also includes companies in other innovative sectors like healthcare, communication services, and consumer products.

Australian investors can also access NDQ conveniently through the ASX – thereby granting an accessible way to invest in global tech leaders. Its concentrated focus on growth-driven sectors can attract investors interested in innovation and cutting-edge industries.

What are the key differences between IVV and NDQ?

Choosing between IVV and NDQ comes down to what you’re looking for. Let’s break down their differences.

Feature	IVV	NDQ
Full name	iShares Core S&P 500 ETF	BetaShares Nasdaq 100 ETF
Index tracked	S&P 500, covering 500 large US companies across various sectors.	Nasdaq-100, focusing on 100 of the largest non-financial Nasdaq-listed companies.
Access for Australian investors	Traded on the ASX, offering Australian investors easy access to US shares.	Also traded on the ASX, targeting similar accessibility for Australian investors.
Sector diversification	Broad sector exposure, including technology, healthcare, financials, and consumer goods.	Concentrated in technology and innovation-focused industries like healthcare and communications.
Top sectors	Technology (~28%), healthcare (~14%), and financials (~11%)	Technology (~50%), communications (~17%), and consumer discretionary (~14%)
Top holdings	Apple, Microsoft, Amazon, NVIDIA, Alphabet (Google).	Apple, Microsoft, Amazon, NVIDIA, Alphabet (Google).
Dividend yield	Generally higher due to broader exposure to income-generating companies.	Typically lower, as tech companies generally reinvest earnings into growth.
Growth potential	Relatively balanced growth across sectors, reflecting US economic trends.	Strong growth potential, driven by innovation-heavy sectors.
Risk and volatility	Comparatively lower risk due to diverse sector representation.	Higher volatility due to concentration in high-growth sectors.
Currency exposure	Affected by AUD/USD exchange rate movements, as with all US-focused ETFs.	Similarly influenced by AUD/USD fluctuations.
Time horizon suitability	Suitable for long-term investors seeking steady, diversified US market exposure.	Suitable for investors with a higher risk tolerance and a focus on tech-driven growth.

Along with this table, you can try the Pearler Compare tool to compare the two ETFs side by side. Consider your preferences, goals and risk tolerance to determine which, if either, is appropriate for your investing strategy.

What costs should I consider?

Cost can play a big role when comparing ETFs like IVV and NDQ. Here’s how the expenses stack up.

• Management fees: IVV and NDQ both charge annual fees, known as management expense ratios (MERs). As mentioned, these fees reduce returns as the money you get to pocket is after fees and taxes.
• Trading costs: Buying or selling IVV and NDQ on the ASX may incur brokerage fees. These vary by broker.
• Currency impact: Since both ETFs invest in US companies, returns can be influenced by changes in the AUD/USD exchange rate.

Lower fees often appeal to long-term investors, but it’s also important to consider other factors like portfolio performance and your goals.

What are the risks?

Both IVV and NDQ offer opportunities. However, their risk profiles vary due to their sector focus and diversification. Here's how they compare.

• IVV: As mentioned, IVV is more diversified across sectors, which can reduce risk tied to any single industry.
• NDQ: As NDQ is heavily weighted in tech and innovation-driven industries, it can potentially be more volatile but offer higher potential growth.
• Economic sensitivity: IVV reflects the broader US economy, while NDQ’s performance depends heavily on the tech sector’s success.
• Market conditions: IVV may be steadier in downturns due to diversification, while NDQ could experience sharper rises or falls. However, like with any investment, both are susceptible to market volatility.

Understanding these differences can help you decide which aligns better with your comfort level and investment objectives.

Who might invest in IVV or NDQ?

The choice between IVV and NDQ often depends on your goals, risk tolerance, and investment strategy.

As discussed earlier, IVV may appeal to those seeking balanced exposure to the US market across various industries. Meanwhile, investors focused on tech and innovation-driven growth may find NDQ’s sector weighting aligns with their priorities.

Time horizon also matters. Long-term investors comfortable with market ups and downs may approach these ETFs differently than short-term investors. Thinking about how each ETF fits into your broader portfolio is key. Both can play specific roles depending on your vision for your investments.

The best choice is the one that reflects your priorities and helps you stay on track.

Hypothetical investor scenarios

Sometimes, examples can help make things clearer. Here’s how IVV and NDQ could fit into different investment strategies for two fictional investors.

Elliot’s approach: IVV as a core holding

Elliot wants stability and broad market exposure. He uses IVV as a core ETF holding in his portfolio. Core holdings are the foundation of a portfolio, designed to provide steady, long-term growth with diversified exposure. IVV’s broad coverage of US companies across multiple industries aligns with this goal. It gives Elliot access to various sectors without overcommitting to one.

Lucia’s strategy: NDQ as a satellite investment

Lucia is drawn to innovation and high-growth opportunities. She uses NDQ as a satellite investment to complement her portfolio’s foundation. Satellite investments focus on specific themes , sectors, or regions to boost potential returns or reflect personal interests. NDQ’s focus on technology and innovative industries adds a layer of growth potential to Lucia’s portfolio, balancing the steady returns of her core holdings. Lucia knows this choice could bring higher volatility but is excited about its growth potential.

Elliot and Lucia have chosen based on their goals and risk comfort. As we’ve said, aligning your choice with your priorities matters.

These scenarios are purely hypothetical and for illustrative purposes only. They don’t guarantee or predict actual investment performance. Always consider your circumstances and seek advice if needed.

IVV vs IDQ: What to consider

Here are some prompting questions you might consider to help decide whether to invest in IVV, NDQ, both, or neither:

1. What are your investment goals? Do you want steady, diversified growth or focused exposure to high-growth industries like technology?
2. What is your risk tolerance? Can you handle the potential volatility of a tech-heavy ETF like NDQ, or do you prefer the broader stability of IVV?
3. What’s your investment timeframe? Are you investing for the long term and willing to ride out market fluctuations, or do you need more predictable returns?
4. How do these ETFs fit into your portfolio? Does your portfolio already have broad market exposure, or are you looking for targeted growth opportunities?
5. Do you want to diversify across sectors? Would the broader sector exposure of IVV or the tech-focused nature of NDQ better balance your portfolio?
6. What role do fees and costs play in your decision? How important are lower management fees to your long-term returns, and have you accounted for other trading costs?
7. Are you influenced by currency movements? Can you handle the impact of AUD/USD fluctuations on returns, or would you prefer to manage currency risks differently?
8. Do you prefer a core-satellite approach or thematic investing ? Would you use IVV as a core holding, NDQ as a satellite, or neither based on your portfolio structure?
9. What’s your broader financial plan? Do these ETFs align with your overall financial objectives, or do other options better suit your strategy?

There’s no single answer to these questions – each investor is different. Find the ETF option that helps you stay on track with your investing journey. And should you find yourself in doubt, consider speaking with a licensed financial adviser.

Which ETF is right for you?

IVV and NDQ offer distinct opportunities for investors. One provides broad market exposure, the other focuses on growth and innovation. Think about what matters most to you – diversification, sector focus, or balancing growth with stability – and choose accordingly.

No option is inherently better. What works best depends on your needs, preferences, and investment approach. Take your time, do your research, and choose the path that keeps you aligned with your long-term goals.

Happy investing!