Tom Nash
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The Nasdaq 100: Should You Invest or Stay Away?
🕑 Added 2024-11-30 14:51:10 +0000 UTCAlright, let’s talk about the Nasdaq 100.
You’ve seen the charts. You’ve heard the hype. “Best returns in 20 years! Tech rules the world!” But is it all rainbows and unicorns? Not so fast. Let me break this down for you.
The Nasdaq 100 isn’t some new kid on the block. It’s been around since 1985, and the QQQ ETF has been around since 1999. It tracks the 100 biggest non financial companies listed on the Nasdaq exchange.
Translation: Tech, tech, tech, and oh, look, Costco for some reason.
Let’s be real. This isn’t an “index” as much as it’s the tech Avengers. Here’s the lineup: Microsoft, Apple, Google, Amazon, Nvidia, Meta, Tesla, Broadcom, and—curveball: Costco.
These nine companies? They make up 45% of the whole thing.
So, if you’re investing in the Nasdaq 100, you’re not buying “diversification.” You’re buying tech on steroids with a side of hot dogs and bulk toilet paper (shoutout to Costco).
Alright, here’s what you really want to know—how much cash would this thing have made you?
20 Year Average: 13.53% per year. Not bad.
10 Year Average: 17.65% per year. Sweet.
5 Year Average: 22.37% per year. You’d have nearly tripled your money.
2023 (So Far): A jaw-dropping 54.85%. Like, wow.
But before you start throwing your entire life savings into this thing, let’s talk about its evil twin: volatility.
The Nasdaq 100 isn’t all Lambos and mansions. It’s had its fair share of wrecks:
2000-2002: The dot-com bust crushed it by 84% in three years. Yes, 84%. That’s not a typo. It took 15 years to recover. Imagine waiting until your kid graduates college to break even.
2008: Down 41.7% during the financial crisis. Ouch.
2022: Another spanking with a 32.6% drop.
This index doesn’t “dip.” It falls off a cliff, and sometimes it forgets to bring a parachute.
You think buying the Nasdaq 100 makes you cool and edgy? Hate to break it to you, but those same big tech stocks are already sitting in every other major index:
In the Nasdaq 100, the Magnificent Seven (Microsoft, Apple, Google, Amazon, Nvidia, Meta, Tesla) make up 39%.
In the S&P 500? 29%.
In the global ACWI index? 18%.
So, if you’re already invested in the S&P 500 or a global fund, congratulations—you’re already partying with these giants.
Here’s the deal:
It’s about as diversified as grandpa's weekend Netflix binge.
The volatility will make your stomach churn faster than Costco’s $1.50 hot dog.
Past returns don’t mean squat about future performance.
BUT...
It’s the stock market’s golden child with stellar returns.
If you got nerves of steel and can handle the rollercoaster an if you are a tech believer who thinks AI, cloud computing, and chips are the future, it may be right up your ally.
By the way, it doesn’t have to be all or nothing. You can put 5%, 10%, or 20% of your portfolio into the Nasdaq 100 and park the rest in something more balanced, like the S&P 500 or a global index. That way, you get the tech gains without the full blown panic attacks.
At the end of the day, there’s no perfect portfolio, and anyone who says otherwise is probably selling you something. The real key to investing isn’t picking winners. It’s sticking to the plan, knowing who you are (trader or a long term investor) through the booms, busts, and yes, even hype cycles.
So, ignore the noise, and whatever you do, don’t let grandpa near the Vodka.
Tom
Comments
Eda Wallace
What are the signs leading up to a bubble? Most investors in my opinion inc myself are not aware of the danger signs . You say there is no perfect portfolio, no crystal ball either. But maybe you can write a piece on risk management?
