Why NASDAQ-100 is the Go-To for Investing in Tech Giants 

The NASDAQ was founded in 1971 and became the world’s first electronic stock market, enabling trading through a computer system. Today, traders can find some of the world’s biggest tech companies such as Apple, Amazon, and Microsoft on it. The NASDAQ is often referred to as a hub for innovative and high-growth businesses and for good reason.

The NASDAQ Composite Index is a widely tracked stock market index that encompasses all stocks listed on the NASDAQ stock exchange. It is one of three major stock market indices in the U.S., along with the Dow Jones Industrial Average and the S&P 500.

Thanks to the NASDAQ index, traders can get a representation of the performance of all NASDAQ-listed stocks and the overall direction of the market. According to many traders, the NASDAQ index is considered a barometer of the technology sector. This is due to the fact that some of the biggest tech companies are listed on the NASDAQ and have a major influence on the state of the index.

Generally, when the index is performing well, it means that technology companies are doing well, and vice versa. The NASDAQ is often considered a riskier and more volatile market when compared to other indices, according to a 2019 article. This is a direct result of the rapid growth and volatility that many technology companies can experience.

Looking specifically at the NASDAQ futures contracts, traders can come to a few conclusions. An index futures contract replicates the movement of the corresponding cash index, providing an early indication of the price activity on the stock market that uses the index. These futures contracts on NASDAQ are traded continuously throughout the market week, with only brief pauses for settlement and maintenance.

As we’ve mentioned the NASDAQ Composite index includes all companies listed on the NASDAQ stock exchange. That’s over 3,700 different companies and their stocks.

Unlike the S&P 500 or the Dow Jones, the NASDAQ index uses a market capitalization-weighted methodology. Put in simple terms, large market capitalization companies have more influence on the NASDAQ index. When their stocks perform well, so does the NASDAQ index. One additional difference is that the NASDAQ index includes all NASDAQ-listed stocks, including small and mid-sized companies, whereas the S&P 500 only includes large-cap stocks.

Aside from the NASDAQ Composite Index, there’s also the NASDAQ-100. Just like the name suggests, it features the top 100 biggest publicly traded companies on the NASDAQ market with the exception of financial companies. This means that the biggest companies in the world have even more impact on the NASDAQ-100 than the NASDAQ Composite index. These companies are chosen based on their market capitalization and each one has a different weight on the NASDAQ-100. Here’s how the top 10 companies of the NASDAQ-100 look and their corresponding weight on the index in the time of writing:

The price of the NASDAQ Composite Index and the NASDAQ-100 is affected by the same events that also affect the price of company stocks. Among the factors, you’d find company profits, the strength of the United States dollar, trader expectations, political events, and more. All of these can affect the price of stocks that form the NASDAQ Index. These are just a few examples that many traders take into account before diving in.

The NASDAQ-100 is one of the most popular stock market indices in the world and it features the 100 largest companies (excluding financial ones) found on the Nasdaq Stock Market. It was created in 1985 by NASDAQ and it consists of two different indices: the NASDAQ-100 and the NASDAQ Financial-100. This is also the reason the NASDAQ-100 doesn’t include any financial companies (since they’re all in the Financial-100)

In recent years, many of the 100 companies on the NASDAQ-100 are coming from the tech sector due to its rapid growth. Unlike other indices, NASDAQ-100 limits the influence of the top 10 companies, currently giving them a weight of approximately 52.

Over the past few years, the domination of tech companies in the NASDAQ has accelerated even further due to the global pandemic and the greater need for digital services during lockdowns.

Looking at it historically, the NASDAQ Index has been on the rise since its creation with only a couple of crashes over the years. The first one was back in the late 90s and early 2000s when we saw the burst of the dot com bubble. During that period, the NASDAQ Index lost over 70% of its value as numerous companies went bankrupt. This was followed by a steady rise until the 2008 economic crisis. Several years after that, the NASDAQ Index surpassed its all-time high from the new millennium and things were looking good. Another crash followed in 2018 when the political tensions between the U.S. and China escalated. The index recovered in a matter of months and the next downturn was right at the start of the global pandemic which was followed by a massive run until November 2021.

Ever since then the NASDAQ Index has been slowly losing steam due to the looming fear of a global recession, increasing inflation, and record-high interest rates. The recent mass layoffs in the tech sector might spell out even more turmoil before the NASDAQ reaches new heights. Despite everything, tech companies are still among the biggest ones in the world. With technology playing an ever-increasing role in our lives, we doubt that’ll change anytime soon.

Want to access the NASDAQ Index and start trading? Follow these steps.

• 1) Find an exchange that you want to trade on
• 2) Create an account with a broker
• 3) Fund your account with a credit/debit card or a bank transfer
• 4) Start trading

You can directly trade shares from many of the companies found on the NASDAQ-100. Another option is to trade the performance of the top tech companies, many of which are part of the NASDAQ-100/NASDAQ Composite Index. Last but not least, you can also trade NASDAQ ETFs that directly track the price of the index. We advise you to avoid using leverage unless you’re already an experienced trader.

To sum up, the NASDAQ index serves as a vital indicator of the performance of technology and is favored by many investors due to its association with innovative and fast-growing businesses. Despite being known for its volatility, the NASDAQ’s recent performance highlights its sustained growth and trading potential and features high-growth stocks that can deliver exponential growth.

Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Klips does not put available shares or any other underlying asset, but CFD derivatives based in underlying assets.