7 Magnificent ETFs for a Nasdaq Melt Up
Investors have plenty of choices to gain exposure to the Magnificent 7, depending on how much risk or reward they choose to take.
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‘Tis the season for counting our blessings … and how many New Year’s resolutions we ignore.
It’s also time for tracking the performance of a stock market that was arguably 2024’s greatest gift to investors last year. The Nasdaq 100 — and particularly the Magnificent 7 — have become investment icons. The tech-heavy index, which tracks the performance of the 100 largest nonfinancial companies in the Nasdaq Composite, returned around 28% last year. It also posted gains in 19 of the past 22 years.
Not everyone may believe in the 2024 bull rally’s ability to continue. But for those seeking a fair share of the spoils, there are plenty of ways to pursue potentially magnificent returns.
Ring Up the New Year
There are at least seven major exchange-traded funds that track the high-flying index — all with unique attributes for just the right clients. As you may have guessed, all seven of these exchange-traded funds (or similar products) have surged in price this year. While their performances are correlated, their individual returns indicate a range of aggressiveness that advisors can deploy.
The original is the Invesco QQQ Trust ETF, although several are old enough (listed 2 or more years ago) that they still refer to this set of giant stocks as FANGs. The Roundhill Magnificent Seven ETF is perhaps the most pure play of the bunch and is up 66% for the year. There are also similar funds that have 2x and 3x leverages, so not for the faint of heart. These are great for clients to gain maximum exposure to Mag 7 upside, but generally are not recommended to be held long-term.
In addition to the long versions, there are also a few products that allow investors to effectively short that stock group via ETFs. Because, hey, bull markets don’t last forever. Here’s a list of some of the most popular options and their total returns, according to Morningstar data:
- MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) was up 160% last year.
- Direxion Daily NYSE FANG+ Bull 2X (FNGG) returned 105%.
- Roundhill Magnificent Seven ETF (MAGS) finished the year up 66%.
- MicroSectors FANG+ ETN (FNGS) ended the year with a 54% gain.
- The YieldMax Magnificent 7 Fund of Option Income ETFs (YMAG) index price finished down 3% (it’s technically a fund of funds).
- Invesco QQQ Trust (QQQ) yielded 27%.
- Invesco S&P 500 Top 50 ETF (XLG) returned 34%.
Me, FOMO? Never. Advisors who managed client emotions through the dot-com bubble and financial crisis know they can’t necessarily count on that dinosaur of a document called a “risk tolerance questionnaire.” Sure, compliance has to have it, but these forms clients fill out while onboarding don’t always match client behavior during a major bull run. FOMO is infectious.
This is the moment in a market cycle where advisors need to know confidently what each fiduciary client really wants. Because, when we use history as a guide, we could be entering a brief, but opportunistic, period to make generous profits. That also means the risk of a sudden decline. When it feels like everyone is getting richer, that’s the prime time for advisors to be, well, advisors.
