The Nasdaq is an acronym for the “National Association of Securities Dealers Automated Quotations,” a platform for buying and selling a range of securities. It is the world’s first electronic stock exchange program and encompasses over 103 equity securities issued by over 100 largest non-financial companies listed on the Nasdaq Stock Market. Nasdaq leads various retail markets, primarily equities, fixed income, derivatives, and commodities, and obtains capital from market investors, ensuring proper conditions for trading stocks.
It is often referred to as a capitalization-weighted index, as the stocks listed are based on market capitalization and do not involve publicly listed financial companies. It is a popular choice because, unlike the other firms, it enables the direct fund transactions between buyers and sellers through an auction system eliminating the intermediary trading dealer breaking the hierarchy, providing opportunities for new sectors and markets, apart from corporate companies.
What is Nasdaq?
Nasdaq is a worldwide electronic marketplace, popular among investors for the risk-free and speedy transactions. The US stock market also lists it as the most reliable platform as it holds a strong portfolio and investments from larger companies in the Nasdaq 100 Index. The term Nasdaq is also used to refer to the Nasdaq ETFs or Nasdaq Index 100, an index fund that comprises huge stocks listed on the Nasdaq exchange funds. It includes the world’s top 10 technology giants, such as Apple, Google, Microsoft, Oracle, Amazon, and Intel. Unlike other stock ETFs, Nasdaq allows direct trading between the seller and buyer through an auction system. With the support of technology, it operates over 25 markets, including trade variations. The Nasdaq 100 Index fund has an equity index of top 100 non-financial securities, listed on the stock exchange and has certain guidelines such as:
Over the years, Nasdaq has developed standards for companies to be included in the index. Those standards include the following:
- Being listed exclusively on Nasdaq in either the Global Select or Global Market tiers.
- Being publicly offered on an established American market for three months.
- Having an average daily volume of 200,000 fund shares.
- Being current regarding the quarterly and annual reports.
- Not listed in bankruptcy proceedings.
Is There A Mutual Fund That Tracks The Nasdaq?
The investments made in NASDAQ can be tracked through Mutual Funds and ETFs.
Mutual funds gather money from various investors, and are traded for stocks and bonds. The fund is maintained at low fees and expenses and maintains a diversified portfolio so that the investors have various options.
In the case of the Nasdaq 100 index, the Fidelity Nasdaq Composite Index Fund (FNCMX) is a popular option, which seeks to provide higher returns corresponding to the performance of the Nasdaq Composite Index. It has a total expense ratio of 0.28%.
ETFs or Exchange Traded Funds allow the investors to pool their money to buy stocks and bonds. They follow certain guidelines and must be traded on a national stock exchange at market prices that may or may not always equal the shares’ net expense ratio.
In the case of the Nasdaq 100 Index, the Fidelity Nasdaq Composite Index Tracking Stock is a popular option, as this fund invests in 80% of the assets in common stocks listed on the index fund and provides investment returns corresponding to the Nasdaq 100 index fund’s performance. The gross expense ratio is 0.21%.
The other option that allows investors to track the Nasdaq 100 Index in their portfolio is the Invesco QQQ, which invests proportionally in the 100 index components for a low expense ratio of 0.20%.
Is The Nasdaq 100 a Good Investment?
Nasdaq operates four basic businesses: Market Services, Corporate Services, Information Services, and Market Technology. It is regarded as highly profitable, with the company earning 34% net income margins, because the company has an established channel creating a competing exchange.
The primary reason to invest in the Nasdaq 100 Fund, is to buy the fund’s shares and diversify the portfolio within a single transaction adding benefit to securities. On the other hand, in a Regular Index Fund, one has to invest in various stocks & funds to diversify their investment. Another reason to invest in Nasdaq Fund is that it has a competitive edge and limited credit risk. As it assures steady performance even in the case of market decline, many of them invest in their exchanges. Nasdaq stock is up by 16.5% approximately, and it has outperformed the other major exchanges.
Nasdaq trading is up by 18% compared to a year ago. This works out to be a price-to-earnings-growth expense ratio of 1.2, which means its market is growing. However, if there is a decline, the company has to up its capital return via dividends and buybacks.
How do I Invest in Nasdaq 100?
The Nasdaq 100 is a platform with large and small companies in the technology sector, and includes securities like real estate investment trusts. It gives a much broader overview of the stocks. The simpler ways to invest in the NASDAQ 100 are:
- Choose the Nasdaq Index Investment: Shortlist the best investment option among the given mutual fund options or ETFs according to the preference. Research top-performing funds that track the Nasdaq Index performance to minimize the risk.
- Trading: ETFs can be traded throughout the day, whereas mutual funds can only be traded once per day. If the price of the shares changes, you may have to pay a higher price.
- Investment: Mutual funds usually start with a minimum investment. Exchange Trade Fund is generally advised for beginners as one can get started with just the cost of a single share.
- Order: Compared to mutual funds, ETFs have more dynamic pricing options, as they offer to set up limits to automatically buy or sell securities when they reach a certain price.
- Buy Shares: With the support of technology, it is easy to buy shares. Firstly, search for desired index funds and enter the number of shares you want to purchase, redirecting to automatic contributions to continue purchasing. If the consumers have IRA or 401(k), they can buy shares with your current account.
- Open an Account: In the case of passive investing, the company will review the financial goals and risk tolerance and design a portfolio and asset allocation following the given profile. However, choose a firm by comparing its market capitalization and the type of investments they offer. Some companies specialize in individual stocks, while others only specialize in exchange funds. By taking advantage of these funds that follow the Nasdaq Index, you can track its performance and diversify your portfolio.
What Companies Are In The Nasdaq 100?
The Nasdaq 100 Index provides a platform with tactical exposure to the technology sector within a buy-and-hold strategy by evaluating their performance and risk involved. The fund has one of the lowest expense ratios in the industry, making annual fees relatively inexpensive for the long-term investor. It includes the top 100 of the largest domestic and international securities listed on the market based on market capitalization.
The Nasdaq 100 is considered a leader in trading technology with huge revenue. For example, the USAA Nasdaq 100 Index Fund posted a strong total return holding 3 billion assets tracking the largest non-financial stocks. Also, the USAA Nasdaq 100 Index Fund has posted stellar returns up about 33%. Hence, the Nasdaq 100 Index holds the largest components listed on the stock exchange. Some of them are:
- Micron Technology
- Intuitive Surgical
- T-Mobile US
- CME Group
- Booking Holdings
- Mondelez International
- Gilead Sciences
- Charter Communications
- Texas Instruments
- Cisco Systems
Nasdaq also keeps track of stocks in the market through Nasdaq Composite and reports the recent value at the end of the month, i.e., Oct 31, 2020, Nov 31, 2020, and posts a log chart annually.
Buying individual stocks can be costly and time-consuming. When it comes to investment, one must carefully research various factors before placing the money to eliminate the risk factor. Though the fund affirms higher returns, one must research their previous investment fund allocated for the market decline, range of securities, risks included, and performance.
The stock market indexes are great for beginners who don’t have the time to research the stocks to invest in, their performance or are new to the concept of evaluating funds. Likewise, index funds act as great investment choices, as they simplify the process by putting your investment portfolio on autopilot with index funds.
Being a tech-heavy stock index, Nasdaq has earned popularity globally and provides opportunities for new economy technology companies at the local level. For example, Motilal Oswal FOF, a passive investment company based in India.
Hence, Nasdaq has achieved a significant role in the industry by providing various common stock options for consumers and exposure to tech giants in the industry, such as Apple, Microsoft, and Amazon. With their support, the process of investing in stocks and bonds, composed of hundreds of rights reserved and a huge range of securities, is made trouble-free.