There would be no international financial system without the NASDAQ 100 Index. This widely followed stock index includes the major non-financial companies listed on NASDAQ Stock Market. It is dominated by technology and biotech giants, provides a broad overview of the performance of the US technology industry, and is a key factor in forming investment strategies.

The National Association of Securities Dealers Automated Quotations (NASDAQ) is a major stock exchange in the United States located in New York City. NASDAQ Inc., founded in February 1971, manages NASDAQ Stock Market, the second largest stock exchange in the United States after the New York Stock Exchange (NYSE).

The Securities and Exchange Commission (SEC) registration, the presence of at least three market makers, and other standards set by NASDAQ must all be met before a company can be listed there.

Understanding NASDAQ 100 Index

Some 100 non-financial companies trading on the stock exchange of NASDAQ are known as “NASDAQ 100 Index”. Each index component has a weight that corresponds to its market capitalization so that larger companies have a greater impact on the index's performance.

The NASDAQ 100 helpfully gauge of the success of the country's major technological corporations because it includes many of these firms (albeit not all of them).

Since some corporations have multiple share classes, the NASDAQ 100 includes 102 stocks. For instance, Alphabet is represented by both its Class A and Class C shares. The index's value is calculated by dividing the market capitalization of its components by a divisor so that no single firm has a weighting in the index of more than 24%.

NASDAQ 100's Sector Composition and Trading Hours

The NASDAQ's regular trading hours are from 9:30 am to 4:00 pm (ET). The health of the US technology industry can be gauged by looking at the NASDAQ 100, which is roughly 60% technology stocks. The current high for the NASDAQ 100 is 16,674, and the current low is 11,878.

Trading on the NASDAQ-100

Contracts for Difference (CFDs) offer a low-cost and time-efficient way to trade the NASDAQ 100. Investors can bet on the movement of the NASDAQ 100 without actually owning any of the underlying instruments or stocks in the index by trading contracts for differences (CFDs) on the index. This method allows for leverage, as well as long and short positions.

CFDs are useful because they allow investors to speculate on dropping prices during market downturns without having to radically rebalance their holdings.

In addition to the NASDAQ 100, investors can trade commission-free share CFDs of other major companies, including Apple, Alphabet, Amazon, Facebook, and Microsoft.

Investing in the NASDAQ 100

The most common way to put money into the stocks that make up the NASDAQ 100 index is through exchange-traded funds (ETFs). Rebalancing can be done more frequently and at a lower cost than when buying individual shares. Invesco QQQ, ProShares UltraPro QQQ, and ProShares Ultra QQQ are three of the most widely held NASDAQ 100 ETFs.

Influencing Factors on the NASDAQ 100

Many external variables, from economic statistics and interest rates to monetary policy decisions and natural disasters, can have an impact on the NASDAQ 100 index. The index is highly sensitive to earnings reports or business news from tech titans like Apple or Amazon because of the index's substantial emphasis on technology and the composition of US-based companies.

Investors should keep an eye on the market's general risk attitude, as technology equities tend to suffer the most during "risk-off" times when people flee to safer investments.

The Performance of the NASDAQ 100

A recent study from NASDAQ revealed that the NASDAQ 100 outperformed the S&P 500 over the 13-year study period, with cumulative total returns approximately 2.5 times that of the S&P500 TR Index.

Despite its higher volatility and less diversified nature compared to the S&P 500, the NASDAQ 100 remains a robust tool for tracking the performance of the largest U.S. technology companies. Some investors may prefer buying the index rather than investing in individual components.

Inclusion Criteria and Top 10 Companies in the NASDAQ 100

NASDAQ has well-defined eligibility criteria for inclusion in the NASDAQ 100 index. Companies need to trade common stocks, ordinary shares, or tracking stocks, be on NASDAQ stock exchange, be non-financial companies, maintain a minimum average daily trading volume of 200K shares, and must have traded for at least three full calendar months.

The top 5 heavyweights of the NASDAQ 100, accounting for over half of the entire index, are Microsoft, Tesla, Meta, Adobe, and Netflix.

FAQs

Can individual investors directly trade on the NASDAQ 100 index?

No, individual investors cannot directly trade on the NASDAQ 100 index. However, they can invest in it indirectly through exchange-traded funds (ETFs) like the Invesco QQQ, which tracks the index, or trade it via financial derivatives like Contract for Difference (CFDs).

Why does the NASDAQ 100 index have more than 100 stocks?

The NASDAQ 100 index comprises of more than 100 stocks because some companies have multiple classes of shares. For instance, Alphabet, Google's parent company, has both Class A and Class C shares listed on the index.

How often is the NASDAQ 100 index rebalanced?

The NASDAQ 100 index is rebalanced every quarter, i.e., in March, June, September, and December. However, the index's constituents are selected annually in December.