Looking to invest in a portfolio of stocks that gives you exposure to US-based tech companies trading on the NASDAQ?
BMO ZQQ is a popular ETF for passive investing in US-based tech stocks.
With this BMO ZQQ ETF review, let’s take a closer look at why you might want to consider investing in the fund.
Tech ETF
Invest in the BMO ZQQ ETF to leverage the market movement of US-based tech sector equity securities hedged against the Canadian dollar.
- It is a low-cost way to invest in US-based companies passively.
- Focuses on the tech sector
- Fees are quite high
What is BMO ZQQ ETF?
BMO Nasdaq 100 Equity Hedged to CAD Index (ZQQ) is an ETF designed to replicate, to the extent possible, the performance of a modified version of the Nasdaq-listed companies index.
The US dollar currency exposure is hedged back to the Canadian dollar.
The underlying index is a modified market capitalization-weighted index that tracks the performance of the 100 largest non-financial equity securities trading on the NASDAQ stock market.
Professionally managed by BMO Global Asset Management, the ETF is a medium-risk investment opportunity that can cater to growth-seeking investors who want exposure to US non-financial equities.
ZQQ.TO is currently trading at close to $123.74.
ZQQ Key Facts
As of October 05, 2023:
- Ticker Symbol: ZQQ.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $1,527.65 million
- MER: 0.39%
- Annualized Distribution Yield: 0.34%
- Currency Traded: CAD
- Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available
Who Should Buy ZQQ?
The ideal investor for BMO ZQQ is someone looking for exposure to the US tech sector without the need to individually select and manage specific stocks, and wants their currency exposure hedged back to the Canadian dollar.
Considering its medium-risk rating, ZQQ can be an ideal addition for growth-focused investors, particularly those who believe in the continued growth potential of the US tech sector. However, it won’t be the best fit for conservative investors or those looking for stable, dividend-producing assets.
BMO ZQQ MER and Fees
BMO ZQQ ETF has a Management Expense Ratio (MER) slightly higher than several other ETFs at 0.39%, but it is not as pricey an ETF to consider others with similar exposure to the tech sector.
BMO ZQQ Dividend Yield
BMO ZQQ provides its investors with payouts annually, provided it reports significant capital gains to support it.
As of Septermber 30, 2023:
- Annualized Distribution Yield: 0.34%
- Dividend schedule: Annually
BMO ZQQ Performance and Returns
The growth of a hypothetical $10,000 since inception for BMO ZQQ:
As of September 29, 2023:
| 1 Year | 2 Year | 3 Year | 5 Year | 10 Year | Since Inception | |
|---|---|---|---|---|---|---|
| NAV | 33.57% | -0.78% | 8.14% | 12.98% | 16.15% | 15.93% |
| Index | 34.19% | -0.23% | 8.75% | 13.67% | 16.85% | 16.67% |
What does BMO ZQQ Invest in?
Most ETFs diversify across various sectors, geographical locations, and between fixed-income and equity securities to align with respective investing goals. However, BMO ZQQ focuses primarily in the Information Technology sector.
With almost half of its assets weighted toward tech sector equity securities, BMO ZQQ can be considered a method to reflect on the sector’s growth in the stock market.
The ETF also provides investors with exposure to consumer discretionary, communications services, and healthcare services without any to the financial services sector.
BMO ZQQ Asset Allocation
Typically in this section of my BMO ZQQ review, I would discuss the asset allocation split between equity and fixed-income securities.
However, BMO ZQQ invests entirely in US-based equity securities without any exposure to fixed-income securities.
The securities in its underlying index do not seek exposure to bonds or any other fixed-income securities, effectively entailing a sense of capital risk in case of stock market crashes.
BMO ZQQ Top Holdings
BMO ZQQ invests in various sectors of the US economy but primarily focuses on the tech sector. Its top ten holdings are all some of the top-performing tech sector giants trading on the NASDAQ stock markets:
As of July 26, 2022:
| Weight (%) | Name | Bloomberg Ticker |
|---|---|---|
| 11.16% | APPLE INC | AAPL |
| 9.78% | MICROSOFT CORP | MSFT |
| 5.31% | AMAZON.COM INC | AMZN |
| 4.55% | NVIDIA CORP | NVDA |
| 3.95% | META PLATFORMS INC | META |
| 3.33% | TESLA INC | TSLA |
| 3.28% | ALPHABET INC | GOOGL |
| 3.24% | ALPHABET INC | GOOG |
| 3.01% | BROADCOM INC | AVGO |
| 2.13% | COSTCO WHOLESALE CORP | COST |
BMO ZQQ Sector Weighting
As of June 30, 2022, as seen in the chart below, the ETF allocates most of its assets to holding equity securities from the US tech sector at 49.91%.
The second-most substantial holdings come from the communications services sector at 17.30%. Consumer discretionary comes in third at 15.10%. Its least significant exposure is to the utility sector at 1.39%, and it invests nothing in the financial services sector.
BMO ZQQ Risk Rating
BMO ZQQ has a medium risk rating.
BMO ZQQ vs. Other ETFs
iShares XIT is BlackRock’s low-cost index fund that also focuses on tech sector equity securities like BMO ZQQ. The ETF is also a non-geographically diversified ETF because it invests primarily in Canadian equity securities.
It may provide investors with more substantial capital growth because its entire asset allocation is towards tech sector securities trading on the TSX, without exposure to other sectors in the Canadian economy.
If you want exposure purely to Canadian tech sector equity securities, iShares XIT could be a viable alternative to BMO ZQQ.
You can check out my full iShares XIT ETF review here.
BMO ZQQ vs BMO ZMID
BMO ZMID is another equity ETF managed by BMO Global Asset Management that focuses primarily on US equity securities. Its underlying index is a market capitalization-weighted index that tracks the mid-cap segment of the US equity market.
Unlike BMO ZQQ, the BMO ZMID ETF does not focus primarily on US tech sector equity securities. It provides you with diversified exposure to a basket of 400 mid-cap US equities.
If you do not want exposure to Canadian equity securities and seek a portfolio of US equities that don’t focus on just the tech sector, BMO ZMID could be a viable alternative to consider.
How to Buy BMO ZQQ ETF in Canada
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Conclusion
BMO ZQQ can be an excellent ETF to consider adding to your portfolio if you seek capital growth.
The tech sector is a significant growth driver in equity markets, and BMO ZQQ provides you with exposure to non-Canadian equities in the tech sector. Beware that it will have high volatility as tech is prone to heavy swings.
Hi Chris
i am seriously considering a NASDAQ ETF. The BMO ZQQ is very appealing however its Hedged to Canadian dollar. is there a unhedged version of this ETF. wouldn’t that be better to buy and hold in your TFSA.
Hey Niran, check out this list, it could provide a couple of other options: https://wealthawesome.com/best-tech-etfs-in-canada/
Can I get personal advice on how to invest in ETfs
I’m releasing an ETF course soon if that’s what you were hoping for, otherwise you can contact me directly via my contact page and I can see if I can help!