Which One Is Going To Give You The Best Performance?

I'm going to let the data do the talking.  

In this video, I break down what's included in the S&P 500 and the NASDAQ 100. I also dive into historical returns for both and give my opinion on which one is performing better.  

What IS The S&P 500 And The NASDAQ 100?

The S&P 500 is a market-capitalization-weighted index of 500 leading publicly traded companies in the United States.

Whereas the NASDAQ 100 is a basket of the 100 largest most actively traded United States companies listed on the NASDAQ exchange. 

According to the NASDAQ 100 website, from 2008 - 2021, they have outperformed the S&P 500 for 11 of those 14 years. 

Looking deeper at the numbers, the NASDAQ 100 has returned 803% in total returns, while the S&P 500 has returned 333% in total returns. 

While the 333% is great, why wouldn't you want the 803%?

Breaking that down annually, on average the S&P 500 gives an 11% return, while the NASDAQ 100 gives a 17% return. 

What Is Included In Each Group?

We can first compare the categories they both share, which includes the following for the NASDAQ 100:

Technology: 59%
Consumer Discretionary: 21%
Healthcare: 6% 
Industrials: 5%
Telecommunications: 5%
Consumer Staples: 3%
Utilities: 1%
Basic Materials: .2%

Comparing to the The S&P 500: 

Technology: 31%
Consumer Discretionary: 16%
Healthcare: 16%
Industrials: 12%
Telecommunications: 3%
Consumer Staples: 5%
Utilities: 3%
Basic Materials: 2%

The S&P 500 includes three sectors/industries that the NASDAQ 100 does not: 

Energy: 3%
Real Estate: 3%
Financials: 10%

Analyzing The Differences

The NASDAQ 100 is heavy on technology companies, making up almost 60%. What happens in technology isn't doing too great? While this can definitely be a concern, it is pretty unlikely in general to technology stocks to perform badly.

What do most technology companies do? These companies evolve and change the world, which brings in revenue, income, cost savings, and things that create growth.

The few sectors that the S&P 500 include that the NASDAQ 100 does not could have a potential to drag it down and possibly deliver lower returns.

So Which One IS Better?

So what do the numbers say? 

You have the potential to get a better return and outperform the S&P 500 by utilizing the NASDAQ 100. 

Final Thoughts 

Ready to get started? Unfortunately, you just can't go out and buy either index. 

However, companies have created ETFs, or exchange traded funds, that mirror the S&P 500 and the NASDAQ 100. You can check them out at Invesco - their mirror of the NASDAQ 100 is under QQQ and Vanguard mirrors the S&P 500 at VOO. 

Want to learn more? Join us at Power Trades University to grow your education in the stock market.