BMO ZQQ ETF Review 2022: Invest in the US Tech Sector

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.

Our Verdict
BMO ZQQ ETF Review 2021
9.4/10Our Score

BMO ZQQ ETF

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.

Pros
  • It is a low-cost way to invest in US-based companies passively.
  • Focuses on the tech sector
Cons
  • MER could be lower

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 $82.7.

ZQQ Key Facts

As of July 15, 2022:

  • Ticker Symbol: ZQQ.TO
  • Exchange: Toronto Stock Exchange
  • Assets Under Management: $1,440.75 Billion (as of July 25, 2022)
  • MER: 0.39%
  • Annualized Distribution Yield: 0.19%
  • Currency Traded: CAD
  • Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available

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 July 15, 2022:

  • Annualized Distribution Yield: 0.19%
  • Dividend schedule: Annually

BMO ZQQ Performance and Returns

The growth of a hypothetical $10,000 since inception for BMO ZQQ:

As of June 30, 2022:

1 Year2 Year3 Year5 Year10 YearSince Inception
NAV-21.35%5.75%13.60%14.38%16.00%15.46%
Index-20.94%6.33%14.25%15.10%16.72%16.21%
Source: Bmogam.com

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.

Source: Bmogam.com

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 (%)NameBloomberg Ticker
13.29%APPLE INCAAPL
10.21%MICROSOFT CORPMSFT
6.33%AMAZON.COM INCAMZN
4.36%TESLA INCTSLA
3.58%ALPHABET INCGOOG
3.43%ALPHABET INCGOOGL
3.16%NVIDIA CORPNVDA
2.96%META PLATFORMS INCMETA
2.13%PEPSICO INCPEP
2.04%COSTCO WHOLESALE CORPCOST
Source: Bmogam.com

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.

Source: Bmogam.com

BMO ZQQ Risk Rating

BMO ZQQ has a medium risk rating.

Source: Bmogam.com

BMO ZQQ vs. Other ETFs

BMO ZQQ vs iShares XIT

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

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

Readers Choice
Qtrade
Qtrade
  • 105 commission-free ETFs to buy and sell
  • Excellent customer service
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  • Easy-to-use and stable platform 
Low Fees
Wealthsimple Trade
Wealthsimple Trade
  • Stock and ETF buys and sells have $0 trading fees
  • Desktop and mobile trading
  • Reputable fintech company
  • Fractional shares available
Well-Rounded
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Excellent market research tools
  • Most types of registered accounts available

To learn more, check out my full breakdown of the best trading platforms in Canada.

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.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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4 thoughts on “BMO ZQQ ETF Review 2022: Invest in the US Tech Sector”

  1. 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.

    Reply

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