If investors are keen on buying the dip in the Nasdaq 100, now might just be the time. While timing the market can prove to be tricky, dollar cost averaging as the index trends lower could also help.
Of course, right now all the talk in the capital markets centers around inflation and just how hawkish the U.S. Federal Reserve will get with regard to raising interest rates. With rising inflation, there’s weakness abound in technology.
That’s been evident in big tech names like Netflix. The online streaming media company missed on its subscriber count recently, making big tech investors nervous.
“Although it seems like a crowded trade at this point, there is likely more pain in store for some of these tech companies as rates grind higher,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors. “As we saw with Netflix, this earnings season will serve as a make-or-break moment for these growthier names where confidence is waning.”
Adding to the worry is the COVID-19 outbreak in China. Social distancing measures and lockdowns are once again causing supply chain issues in the world’s second-largest economy.
“Because of the shutdown of Shanghai and other cities in China, a lot of the parts that are used in hardware are unable to be shipped around the globe to satisfy hardware orders, and so from a technology perspective, I think that’s putting pressure,” Stovall said. “Also if people can’t leave their homes, then you’re talking about a pretty large amount of people who not able to purchase items.”
2 Ways to Buy the Dip
Investors who can stomach all the volatility and want to buy the dip can do so with liquid ETFs like the Invesco QQQ Trust (QQQ). The popular fund that tracks the Nasdaq-100 Index (NDX) has long been the gold standard for accessing NDX’s lengthy out-performance of traditional benchmarks like the S&P 500 and the Russell 1000.
Another option is the Invesco NASDAQ 100 ETF (QQQM), which is also based on the Nasdaq-100 Index. The index includes securities of 100 of the largest domestic and international non-financial companies listed on the Nasdaq.
At a 0.15% expense ratio, the fund can also be used as a trader’s tool like its bigger brother QQQ. In QQQM, investors will see familiar names like Apple, Google, Facebook, Amazon, and Microsoft.
For more news, information, and strategy, visit the Nasdaq Investment Intelligence Channel.