The NASDAQ-100 is an American stock index created in 1985 that follows the 100 largest non-financial companies listed on the Nasdaq Stock Market, which is the second largest market in the US after the NYSE.
Today, the companies with the greatest weight are from the technology sector, but not all its components are companies from this sector. In the past, it had companies such as United Airlines, OReilly, PEPSICO and Urban Outfitters.
NASDAQ-100: characteristics, components, and distribution by sectors and geography
Characteristics of NASDAQ-100
The requirements to be included in the NASDAQ-100 are as follows:
- To be listed on the Nasdaq stock exchange
- Trading for at least 3 months
- Be up to date on quarterly and annual reports
- Not to have declared bankruptcy
- Have a daily volume of 200,000 shares
- If the company is outside the USA, then it must have financial options trading on a recognised American market
One hundred companies with the largest capitalisation that meet these criteria are included in the NASDAQ 100.
The index is rebalanced every December. Each quarter, it adjusts the weights of its components so that the largest companies do not have too much influence on the index.
Components of the NASDAQ-100
Below are the first 20 companies in NASDAQ 100:
|9||Meta Platforms Inc||META||2.22|
|10||Costco Wholesale Corp||COST||2.02|
|12||Cisco Systems Inc||CSCO||1.89|
|13||T-Mobile US Inc||TMUS||1.76|
|14||Texas Instruments Inc||TXN||1.50|
|18||Honeywell International Inc||HON||1.36|
Distribution by sectors and geography
Not all companies in the index are from the technology sector, although most of them are. In fact, many of the defensive and consumer sector could also be considered technological, for example, NFLX, TSLA or AMZN.
Unlike the S&P500, NASDAQ100 can have shares of foreign companies as long as they meet the requirement mentioned above. For example, JD, BIDU, ASML or NTES. Even so, 97% are American companies.
Best funds for investing in NASDAQ-100
The question is, how do we invest in this index? Funds and exchange-traded funds are the most common financial instruments. There are multiple mutual funds that track the NASDAQ-100:
|Fund Name||ISIN||Total Expense Ratio|
|Fidelity Nasdaq-100 Index Fund||US3159127097||0.31%|
|BlackRock Global Funds – Nasdaq-100 Index Fund||IE00B53SZB19||0.33%|
Best ETFs for investing in NASDAQ 100
Best ETFs for investing in NASDAQ-100:
|ETF Name||TER||Currency||Replication Method|
|iShares Nasdaq 100 UCITS ETF||0.33%||GBP, USD, EUR||Physical|
|Invesco EQQQ Nasdaq-100 UCITS ETF||0.30%||GBP, USD, EUR||Physical|
|Lyxor Nasdaq-100 UCITS ETF||0.22%||USD, EUR||Synthetic|
|Xtrackers Nasdaq 100 UCITS ETF||0.20%||GBP, USD, EUR, CHF||Physical|
|Invesco NASDAQ-100 Swap UCITS ETF||0.20%||USD||Synthetic|
|Invesco Nasdaq-100 Swap UCITS ETF||0.25%||GBP, USD, EUR||Synthetic|
The following graph shows the returns of NASDAQ-100 compared to the S&P 500.
In recent years, the NASDAQ100 has performed better than the S&P500, but this doesn’t mean that it is a better choice. Consider the following scenario, which compares two investments in a fund that tracks NASDAQ-100 and another that tracks S&P500:
Therefore, there are multiple factors to consider before investing in a fund that tracks any index, including performance, fees of the fund, and even price volatility.
Interactive Brokers is perhaps the best choice if you want to trade or buy-and-hold ETFs. Apart from being a fully regulated broker, IB offers a “no transaction fee” program for ETFs.
Put simply, you don’t pay any commissions on ETFs if you are an IBKR Lite client, and you are reimbursed if you are an IBKR Pro client as long as you hold the fund for more than 30 days. Over 150 ETFs qualify for this program, offering you one of the broadest choices for ETF trading.
For more details, have a look at our Interactive Brokers review.
Learn more about funds and indices:
- Global stock indices
- Dow Jones guide
- Best NASDAQ ETFs
- Best ETF brokers
- Best ETFs
- Best Vanguard ETFs
- Best ETFs in India
- Best Amundi ETFs
- Best Invesco ETFs
- Best FTSE100 ETFs
Not everything that glitters is gold, and past performance is not an indicator of future performance. The technology sector has had several severe drops apart from the dot-com bubble, so it would not be strange to see another one in the future.
Future uncertainty is why investors must craft a thorough strategy. Risk management is also key to protecting yourself from potential downsides.
What is the NASDAQ-100 Index?
The NASDAQ-100 Index is a benchmark index that represents the performance of the 100 largest non-financial companies listed on the Nasdaq Stock Market. It includes well-known technology and growth-oriented companies such as Apple, Amazon, Microsoft, and Google (Alphabet).
How can UK investors invest in the NASDAQ-100?
UK investors have several options to invest in the NASDAQ-100. One common way is through exchange-traded funds (ETFs) or mutual funds that track the index. These funds can be bought and sold via online brokerage platforms.
What are the advantages of investing in the NASDAQ-100?
Firstly, it provides exposure to a basket of leading technology and growth-oriented companies that have the potential for high growth and innovation. Secondly, it allows diversification across multiple sectors and industries, reducing the risk associated with investing in individual companies. Additionally, the NASDAQ-100 has historically delivered strong long-term returns, although past performance is not indicative of future results.