Many investors employ index (stock price index) investments as a common form of long-term asset management. The disadvantage of index investing is that you cannot constantly expect to make huge profits because index price changes are more consistent than specific stock prices. The “Nasdaq-100,” which we may anticipate to do better than any other index, is the subject of this research.
Here are three reasons why you should invest in Nasdaq-100.
Company Growth During COVID-19 Pandemic
The Nasdaq-100 has established itself as a staple benchmark of the US market due to the recent explosive rise of the stocks that make up its index. It embodies the fundamental concepts of globalization, digitization, and innovation.
The Nasdaq-100 businesses Apple, Amazon, Meta Platforms, Alphabet, Tesla, PayPal, Zoom, NVIDIA, and Moderna all prospered despite the COVID-19 pandemic decimating a large portion of the world economy.
Zoom was unquestionably the “winner” of the pandemic, and as global lockdowns forced a shift to remote working, usage overgrew. Zoom exceeded 300 million regular meeting attendees in June 2020, an increase of +2900% from December 2019.
Following a global opening, the number of participants has decreased, but due to the coronavirus’s structural effects on work flexibility, usage is still higher than before the pandemic. The Nasdaq-10 now includes Airbnb, Cloudstrike, and Honeywell International as of 2021.
Constituent stocks
The ability to simultaneously purchase the most cutting-edge top-brand firms worldwide is a fascinating aspect of buying mutual funds and ETFs performance benchmarks to the Nasdaq-100. The primary businesses of the firms in the index revolve around the major topics of artificial intelligence (AI), big data, cloud services, and robots. However, it also includes biotech, fintech, and the media, each of which has demonstrated impressive potential growth in recent years.
Tesla, Adobe, PayPal, and Microsoft were named among the “Five Fastest Growing Brands”. Interestingly, the leading Japanese firm, Toyota Motor Corporation, was ranked seventh on the “Best Global Brands 2021” list, while Samsung of South Korea was ranked fifth.
Additionally, numerous Nasdaq-100 businesses, including Apple, PepsiCo, Alphabet, Microsoft, and Amazon, were ranked within the top 10 on Tenet Partners’ list of the “Top 100 Most Powerful Brands of 2020.” Being Japanese, I find it disappointing that so few Japanese companies are represented on the list. Still, the Nasdaq-100 includes many businesses with great brands and significant room for expansion.
Historic performance
The long-term performance of the Nasdaq-100 has outperformed that of its competitors. The Nasdaq-100 has significantly outperformed the S&P 500 during the past 15 years, returning a total of 705.5% through the end of August 2022, nearly twice as much as the S&P 500’s return of 362.4%.
This was accomplished with higher volatility for the Nasdaq-100 than the S&P 500 (20.4% p.a. vs. 22.8% p.a.). The difference in volatility is bigger, however, if a more recent time frame is considered, which ignores the impacts of the Global Financial Crisis in 2007–2009: 20.3% p.a. versus 16.8% p.a. over ten years.
Since 2003, Nasdaq-100 constituent businesses have seen double-digit annual sales growth of 21%, +13% yearly earnings growth, and a +26% yearly dividend increase.
Bottom Line
The firms that make for the Nasdaq 100 have prospered despite the COVID-19 pandemic’s adverse effects. They have unmatched brand value and growth potential and will keep expanding their influence as a motivating factor for businesses worldwide. Although the change in US monetary policy has lately caused a significant adjustment in the stock price, it is expected that it will finally turn higher for such reasons.
You should expect significant returns in the long run if you use the current adjustment period as a purchasing opportunity and consistently use the investment strategy of “buying when the market falls dramatically” instead of investing all of your capital all at once.
