Nasdaq 100 vs S&P 500 Over The Last 10 Years

The stock market plays a crucial role in the functioning of individual business entities and the development of the financial market as a whole. The S&P 500 and the Nasdaq are widely used as indicators of market trends. Studying these helps researchers and investors gain a better understanding of the market. Comparing both indices allows a better understanding of the risk, return, and volatility of the market. This article discusses the performance of Nasdaq and the S&P 500 over the last ten years.

What Is The S&P 500?

S&P  is made up of 500 largely publicly listed US companies across sectors. It accounts for 80% of the US stock market capitalization and is regarded as a broad indicator of the country’s equity market. The companies belong to various sectors such as healthcare, finance, technology, and energy. It is mainly used to study as a criterion to measure the market and performance. Strategy (formerly MicroStrategy), Coinbase, Tesla, Broadcom, and Berkshire Hathaway are a few examples of the S&P 500. These companies belong to different sectors, which shows the diverse nature of the S&P 500.

What Is The Nasdaq 100?

Nasdaq is composed of the 100 largest domestic and international non-financial companies listed on the Nasdaq stock market. Unlike the S&P 500, the NASDAQ 100 is a tech-savvy index. It mainly comprises technology and growth-oriented companies, but it does not include banks and insurance firms.  It has higher risks and is highly volatile in nature, although it is known for higher growth potential. Companies like Apple, Microsoft, NVIDIA, Amazon, Alphabet (Google), which belong to this, show the tech-heavy nature of the NASDAQ 100.

How Have The S&P 500 And The Nasdaq 100 Performed In The Last 10 Years?

During the past decade, the NASDAQ-100 has outperformed the S&P 500 in terms of overall returns. Companies such as Microsoft, Apple, Amazon, NVIDIA, etc. played a major role in pushing the Nasdaq higher. Even the S&P has benefited from this. Companies like Apple and Microsoft play a significant role in the growth of the Nasdaq-100. For example, strong sales of iPhones and services helped in the long-term growth.

Microsoft has played a major role in the growth of cloud computing, software, and AI. Amazon, especially after 2020, has contributed strongly to the index’s rise in e-commerce. These companies are focused on technology, which shows why the NASDAQ 100 grew faster over the past ten years. The same companies are also in the S&P 500, but they have greater weight in the Nasdaq-100.

How To Invest In The S&P 500 And The Nasdaq 100?

You can invest in the S&P 500 and Nasdaq 100 by buying individual stocks in those indexes or by buying ETFs, which are funds that include all companies in the index. For the S&P 500, you could buy big companies like Apple or Microsoft. In the case of the Nasdaq 100, mostly tech companies like Tesla or Amazon are included. An ETF holds all the stocks in an index. So when you buy an ETF, you automatically own a small part of every company in that index.

For example, SPY is an ETF for the S&P 500, so buying SPY means you own tiny shares of 500 big US companies.  QQQ is an ETF for the Nasdaq 100, so buying QQQ gives you shares of 100 mostly tech companies. Buying ETFs helps in instant diversification as your money is spread across many companies. They are comparatively safer and easier than picking individual stocks because if one company is not performing well, it won’t affect you much. You can buy them easily through a brokerage account. 

Conclusion 

The S&P 500 is a safer and more stable investment because it includes 500 companies from many sectors. The Nasdaq 100 focuses on tech and growth companies, so it can grow faster and is more volatile. Over the last ten years, the Nasdaq 100 outperformed the S&P 500 due to increased tech growth. You can invest in both through individual stocks or ETFs, like SPY (S&P 500) and QQQ(Nasdaq 100). ETFs are easier because your money is spread across many companies. 

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