The NASDAQ stock exchange is one of the most popular and dynamic stock exchanges in the world. It is home to a wide range of innovative companies, including technology companies such as Microsoft, Amazon, and Tesla.
Investing in NASDAQ from the UK is now easier than ever. There are a number of brokers in the financial market that offer access to the NASDAQ, and the process of opening an account with a trusted broker and starting to trade is relatively straightforward.
This comprehensive guide unveils the simplicity of investing in NASDAQ, whether through market indices or individual stocks. Simply put, this guide will show you how to invest in NASDAQ in the UK.
What is the NASDAQ?
The NASDAQ is a stock exchange created in 1971 as an alternative to the New York Stock Exchange (NYSE). Initially, it was created to trade stocks of high-growth technology companies.
Securities are traded electronically on a variety of platforms on the NASDAQ. Investors can buy and sell shares directly on the market, without the need for an intermediary. The NASDAQ also offers market information services and trading tools.
Being one of the largest and most popular stock exchanges in the world, NASDAQ is quite a dynamic and exciting stock market.
Brief history of the NASDAQ
Let’s take a brief look at the evolution of the NASDAQ since its conception in the mid-20th century to the present:
- 1960: The SEC asks NASD to regulate the OTC market in the United States.
- 1971: NASD automates the market and creates the NASDAQ.
- 1975: NASDAQ develops quotation standards and separates the shares of stronger companies from the OTC.
- 1982: The most powerful companies on the NASDAQ split and create the NASDAQ National Market.
- 1991: NASDAQ stocks are recognized as equal to those traded on the AMEX or NYSE.
- 1995-2000: Dotcom bubble, period of rapid growth of technology and internet companies on the NASDAQ. During this time, the NASDAQ grew more than 400% and reached its peak in March 2000.
- 2000-2002: Dotcom crash, which caused the NASDAQ to lose more than 70% of its value by October 2002.
- 2020-2022: Covid bubble, which meant an increase in the valuation of technology companies on the NASDAQ due to increased dependence on technology for remote work and online education. During this time, the NASDAQ grew more than 65% and reached its peak in November 2021.
- 2021-2022: End of the Covid bubble: The NASDAQ suffered a significant setback due to inflationary tensions and rising interest rates. From February 2021 to October 2022, the NASDAQ went on to lose 35%.
Currently, Nasdaq is operated by Nasdaq, Inc. and is a stock exchange where technology companies, such as Microsoft and Intel, are primarily listed.
As mentioned earlier, investing in an index is like investing in the market as a whole. In this case, investing in a NASDAQ index is investing in a basket of securities composed of a series of most representative companies of the NASDAQ
The following is an evaluation of the primary indices of NASDAQ:
The NASDAQ 100 is a stock index that includes the 100 largest technology companies of the NASDAQ Stock Market (in reality there are 103, since 3 of the companies that make it up issue two classes of shares).
These companies are selected based on their market capitalization, income, operating profitability and liquidity. We can say that this index measures the performance of the 100 largest NASDAQ companies every day.
The Nasdaq Composite is a stock market index that measures the performance of all of the stocks listed on the Nasdaq stock exchange. It is a broader index than the Nasdaq 100, which only measures the performance of the 100 largest stocks on the Nasdaq exchange.
The Nasdaq Composite is a market-capitalization-weighted index, which means that the weight of each stock in the index is based on its market capitalization. This also means that the largest companies in the Nasdaq Composite have the greatest influence on the index’s performance.
As of March 2023, the NASDAQ Composite includes more than 3,400 companies listed on that market, making it one of the world’s largest stock indices.
The NASDAQ Biotechnology is one of the most important indices of the NASDAQ. It is composed of the main stock values of the biotechnology sector, and its total capitalization exceeds two trillion dollars. These companies range from pharmaceutical biotechnology companies to food biotechnology companies.
Investors use the index to measure the performance of the biotechnology sector. This helps us identify trends, discover investment opportunities and better understand potential risks.
NASDAQ Financial Performance
There is no specific stock index called “NASDAQ Financial”. However, the NASDAQ market has several stock indices that focus on specific companies within the financial sector.
For example, the NASDAQ Financial-100 Index (NQIXF) is an index that includes the 100 largest financial companies listed on the NASDAQ market. These companies can belong to different financial sub-industries, such as banks, insurers, investment services, investment funds, among others.
There is also the NASDAQ Bank Index (NQBKX), which includes companies mainly dedicated to banking, and the NASDAQ Insurance Index (NQKIX), which includes companies mainly dedicated to the insurance sector.
In summary, the NASDAQ market has several stock indices that focus on companies in the financial sector.
How to invest in NASDAQ?
The NASDAQ is one of the main stock markets in the world. It is known for mainly operating with electronic values, which provides greater transparency and greater liquidity.
It offers a variety of financial products, including stocks, bonds, derivatives, ETFs, mutual funds, options and other financial instruments. Its shares are traded online and can be bought and sold in real time.
The best way to invest in the NASDAQ is through ETFs (exchange-traded funds) that replicate the performance of a specific stock index, such as the NASDAQ Composite Index.
With ETFs, investors can buy and sell shares of major stock indices without having to buy and sell individual shares.
Invest in NASDAQ: Stock picking or buying NASDAQ stocks
Here are some of the steps involved in acquiring NASDAQ stocks in the UK:
- The first step to buying stocks on the NASDAQ is to choose the stock or corporate bond -This is referred to as stock picking or stock selection.
- To make a good stock selection, you must do proper research on the companies offering stocks on the NASDAQ.
- The next step is to open an account with a trusted broker. Then, you just have to deposit the funds that will serve to finance your investment- your investment funds for NASDAQ should be substantial enough to acquire the amount of shares you would like to purchase.
- With this, you should be ready to buy and sell stocks.
Here are some of the some of the best brokers to buy NASDAQ stocks from in the UK:
|Eightcap||Financial Conduct Authority (FCA)||No commissions||See more|
|eToro||Financial Conduct Authority (FCA)||No commissions||See more|
|Freetrade||Financial Conduct Authority (FCA)||No commissions||See more|
|Interactive Brokers||Financial Conduct Authority (FCA)||$0.005 per share||See more|
Here are a few examples of companies listed on the NASDAQ Market. These companies are also part of the NASDAQ 100:
- Software: Microsoft, SAP, Oracle, IBM, Symantec, etc.
- Hardware: Apple, Samsung Arlo, Cisco, HPe.t c
- Internet: Facebook, Google, Alphabet, Netflix, e.t.c
- Semiconductors: Intel, Qualcomm, Infineon Technologies.
- E-commerce: Amazon, Paypal, e-bay, Walmart, Shopify
- Biotechnology: illumina, Gilead Sciences, Biogen, Pfizer
You can also invest in Nasdaq through individual stocks-this is ideal for investors who do not fancy being too exposed to the technology sector.
Many non-technology companies are listed on NASDAQ, and some of them are also part of the NASDAQ-100 index. Here are a few of them:
- Food: PepsiCo, Monster Beverage.
- Pharmaceuticals: Mylan, Alexion Pharmaceuticals, Celgene.
- Automotive: Paccar, O’Reilly Auto Parts.
- Transport: American Airlines Group.
Investing in NASDAQ through ETFs
ETFs can offer better portfolio diversification for your investments. By investing in the NASDAQ through ETFs, you have the potential to gain exposure to a variety of financial assets in one place. This means you can reduce the risk of your portfolio by diversifying it.
|Name||Ticker||ISIN||Where to buy|
|iShares Nasdaq 100 ETF||IQQ||IE00B3GX9Y84||Hargreaves Lansdown, AJ Bell, Freetrade|
|Vanguard FTSE Nasdaq 100 ETF||VUSA||GB00B03MG735||Hargreaves Lansdown, AJ Bell, Freetrade|
|UBS ETF (UCITS) Nasdaq 100 UCITS ETF||UCU1||IE00B1XNHC37||Hargreaves Lansdown, AJ Bell, Freetrade|
|Lyxor MSCI USA Technology Index ETF DR||LYX0||FR0010477967||Hargreaves Lansdown, AJ Bell|
Whether you want to invest directly in the Nasdaq through its index or create a diversified portfolio that favours technology stocks listed on this market, indexed funds offer a good alternative.
In fact, these investment products were created to make the world of investments more accessible to the average saver. Investing in funds is simple and you automatically get a complete and diversified portfolio of stocks.
There are indexed funds that replicate the behavior of indices. This type of investment fund can be a good option as it has lower fees than actively managed funds; it also does not require active management (other than periodic rebalancing).
In this way, it is possible to invest in the entire NASDAQ market through an investment fund that follows the behavior of one of its indices.
Investing in NASDAQ through CFDs or derivatives (futures, options)
These financial products offer exposure to the price movements of the underlying assets without having to buy them directly. Investors can benefit from price movements both upwards and downwards. You can also benefit from the leverage offered by these products because they can increase your exposure to price movements without having to use all the capital.
However, investing in NASDAQ through CFDs or derivatives also carries some risks. Because these financial products are leveraged, investors can lose more than their initial capital if the market moves against them. In addition, investors must take into account the associated costs which include administration fees and exchange commissions.
|eToro||Yes||Stocks, ETFs, CFDs||0%|
|InvestEngine||Yes||ETFs||£0.10 per trade|
|Interactive Investor||Yes||Stocks, ETFs, ISAs||£9.99 per month|
Top 10 largest companies on the NASDAQ
Here is a list of the 10 largest companies on the NASDAQ so far:
- Apple (AAPL)
- Microsoft (MSFT)
- Amazon (AMZN)
- Meta (FB)
- Alphabet (GOOG)
- Tesla (TSLA)
- Nvidia (NVDA)
- PayPal (PYPL)
- Comcast (CMCSA)
- Adobe (ADBE)
*Of course, this list may be subject to variations over time
Why Should You Invest in NASDAQ from the UK?
When considering investment options, you simply cannot overlook the appeal of NASDAQ. There are many compelling advantages that NASDAQ offers to investors. Here are of a few of them:
Here is the comparison showing the growth potential of the NASDAQ against the SP500. As we can see, there has been a significant increase in the NASDAQ in recent years.
The NASDAQ is one of the main stock markets in the world, and offers a wide range of investment opportunities. From high technology to biotechnology, which allows investors to diversify their portfolio to the maximum.
The NASDAQ covers all kinds of technology companies, and as we know the future of the productivity of developed countries is located in technology; cyber security, i-clouding, artificial intelligence. And all of these secrets are contained in the index.
Technology has a real application in almost every aspect of our daily lives. Here are just a few examples:
- The transport (vehicles increasingly equipped in comfort and safety).
- Telecommunications (social networks, new forms of leisure and information, B2C, B2B, 5G, etc.).
- Health care (robotics, biotechnology, etc.).
- Financial services (electronic banking, Fintech, robo advisors, Blockchain and cryptocurrencies, etc.).
- Computer science (home automation, cloud computing, artificial intelligence, big data, etc.).
In addition, it is one of the largest stock markets in the world, with a market capitalization of more than $11 trillion. This means that there is a large amount of capital available to invest and a great opportunity to obtain significant returns.
Some analysts and investors have raised concerns about the possibility of a bubble forming in the technology sector due to the rapid growth it has experienced in recent years
However, the truth remains that the profits generated by technology companies and the progress they can make in the future are likely to continue to increase the value of these companies.
The sectoral differentiation of the NASDAQ is one of the most important advantages of this technological index. By including several technological subsectors such as artificial intelligence, cyber security, banking and insurance, the NASDAQ offers a complete view of the performance of the technology sector and its related industries.
One of the main advantages of this sectoral diversification is that it allows investors to have a greater variety of investment options. Although the index focuses on technology, each subsector has its own dynamics, which means that investors can choose where they want to invest according to their own needs and objectives.
Here are the weighting of each sector within the index:
- Technology: 52%
- Discretionary Consumption (non-essential): 18%
- Health: 9%
- Industry: 5.49%
- Financial: 4.13%
- Telecommunications: 3.62%
- Basic Consumption: 3.33%
- Others: Less than 5%
The NASDAQ is regulated by the SEC-this body uphold a standard set of rules that demand transparency and disclosure from the NASDAC.
The SEC ensures that the NASDAC submit accurate and complete financial reports, as well as comply with information disclosure standards in a timely manner.
The sole aim of all of these regulations is to offer investors the utmost form of financial security and minimize the possibility of financial losses.
The liquidity of the NASDAQ market is commended worldwide. It is in fact regarded as the most liquid market in the world. As an investor, you get to buy and sell shares with relative ease and minimal waiting time.
Reports from NASDAQ’s official website show that on an average day, more than 5 billion shares and $200 billion worth of trades take place.
These figures prove the availability of opportunities for investors on the platform. Any investor looking to invest in any of the companies of ETFs listed on NASDAQ should easily find a suitable counterpart.
One of the key reasons you should invest in NASDAQ is the simplicity and convenience of the process. .You can purchase and sell your shares quickly without the hassle of complex procedures.
You will even find brokers that offer you the chance to purchase American stocks free of charge, i.e., without charging any commission.
There may be charges for investing in the European, Asian, or even local markets, but the American market is usually exempt from such charges. It is safe to say that accessibility to the American market is undoubtedly one of the major advantages that come with investing in NASDAQ.
Holidays in the NASDAQ
The NASDAQ closes on several occasions, typically coinciding with public holidays on the stock exchange calender. Here are a few examples of NASDAQ market holidays:
- January 16 – Martin Luther King Jr. Day
- February 20 – Presidents’ Day.
- April 7 – “Good Friday” (Good Friday).
- May 29 – “Memorial day” (Day of the Fallen).
- June 19 – “Juneteenth” (Day of the end of slavery in the US).
- July 3 – Independence Day.
- September 4 – “Labor Day” (Labor Day).
- November 23 – “Thanksgiving day” (Thanksgiving Day).
- December 25 – December 25 Christmas Day.
Pros and cons of investing in the NASDAQ from the UK
Like any other financial adventure, investing in the NASDAQ has its pros and cons. Here are a few of them:
|Pros of investing in the NASDAQ||Cons of investing in the NASDAQ|
|Investment offer: Stocks, ETFs, Bonds…||High volatility|
|Exceptional transparency||Higher risk|
|Possibility of venture capital||Possible loss of capital|
|Real-time operation||Currency risk|
|Accessibility and liquidity||Selective liquidity|
Alternatives to Investing in the NASDAQ
When you invest in NASDAQ, you are not merely staking your funds with some of the world’s largest companies; you are also being exposed to an index that is transparent, accessible, and has the potential for growth.
However, it is important to remember that investing carries the risk of losing money. The value of your investment can go up or down, and you could lose all or part of your investment.
As a general rule, you should only invest money that you can afford to lose.
What is the difference between the NASDAQ and the London Stock Exchange?
The NASDAQ is a US stock exchange, while the London Stock Exchange is a UK stock exchange. The NASDAQ is home to more technology companies, while the London Stock Exchange is home to a wider range of companies.
What are the factors that can affect the profitability of trading with the NASDAQ in the UK?
Market conditions, such as the overall direction of the stock market, as well as currency fluctuations and political events can affect the profitability of trading with the NASDAQ in the UK.
What are the safest alternatives to investing with the NASDAQ?
Government bonds, high-quality corporate bonds, and money market funds are your safest alternatives.