If you are looking to invest in US equity markets through the mutual fund’s route, you will typically see that most funds benchmark their performance either against Nasdaq 100 or S&P 500 indices.
In this video, we will explain what you get if you choose to invest in funds tracking either Nasdaq 100 or S&P 500 indices and how they differ in performance and portfolio. This will help you select the fund that suits your risk and return profile.
Topics Covered:
00:00 Introduction
01:28 S&P Index
05:42 NASDAQ 100 Index
08:20 Comparing the NASDAQ 100 and S&P 500
11:30 FAANG Stocks
14:06 NASDAQ 100 or S&P 500 – Which One?
👉 The S&P 500 Index
Launched in 1957, S&P 500 is one of the oldest indices of the US, made up of stocks of the 500 biggest listed US companies. These companies combined represent more than 80% of the total market capitalization of the companies listed on the US stock exchange. Therefore, S&P 500 index can be considered a broad indicator of the US equity markets.
The higher the market cap, the higher the weightage of the stock in the index. The market cap of the stocks is calculated by multiplying the number of shares available for trade on the stock exchange by the company’s stock price. Apart from market cap, there are other criteria for stocks selection such as percentage of shares available for public trading, earnings growth, trading volumes (share price multiplied by the number of shares traded), etc.
Although the top holdings include tech biggies such as Apple and Microsoft, the allocation to the sector combined is less than 30%. Companies from the top three sectors together account for around 53% of the index portfolio, which is far lower when compared to Nasdaq 100.
With around 500 stocks, the index represents over 11 sectors, including information technology, energy, materials, industrials, consumer discretionary, consumer staples, health care, financials, communication services, real estate, and utilities.
👉 The Nasdaq 100 Index
Launched in 1985, Nasdaq 100 index represents the biggest 100 non-financial companies listed on the Nasdaq Stock Exchange.
The US is home to some of the biggest financial and technology companies. The exclusion of the financial biggies results in Nasdaq 100 being dominated by global tech majors including Apple, Google, Microsoft, Tesla, etc. Nasdaq 100 also includes the popular FAANG (Facebook, Apple, Amazon, Netflix, Google, or Alphabet) stocks of the biggest tech companies across the globe. Tech companies combined account for over half of the holdings of the index. The dominance of the technology stocks in the index makes it a narrower tech-heavy index even though it also includes Pepsi and Starbucks; however, the allocation is not very high.
S&P 500 Index V/s Nasdaq 100
Nasdaq 100 has significantly outperformed S&P 500 in terms of performance. Over the past 15 years, Nasdaq 100 has delivered a CAGR of around 16%, while S&P 500 has returned about 8%.
The average 10-year return of Nasdaq 100 over these 15 years was around 9%, while that of S&P 500 was about 5%. You could have earned a maximum 10-year CAGR return of 21% by investing in Nasdaq 100, while in the case of S&P 500, you could have earned a maximum return of 14% in the past 15 years.
The significantly higher allocation towards FAANG stocks has ensured that Nasdaq 100 has outperformed S&P 500 index by a wide margin.
👉 Nasdaq 100 or S&P 500?
The numbers show that Nasdaq 100 has significantly outperformed S&P 500 index in terms of return over long term despite witnessing higher correction. However, a tilt towards technology stocks makes Nasdaq 100 look more like a thematic index. As FAANG stocks, which account for a majority of the portfolio of Nasdaq 100, have already rallied quite a bit, they may find it difficult to sustain such as run going forward and if there is a correction in the markets, they are likely to get hit harder as seen in the past.
Therefore, the downside risk is likely to be higher in case of the Nasdaq 100 when compared S&P 500 index, which has a much broader representation of the US companies across different sectors.
So, if you are looking to own a more diversified basket of stocks, the S&P 500 will be the right fit for you. However, those who are comfortable with the slightly higher risk for the extra returns that investing in Nasdaq 100 based fund might generate will be better off with Nasdaq 100.
Choose the index based on your own risk and return profile.
👉 To invest in Direct Plans of top Mutual Funds for free, download the ETMONEY app:
👉Read more such informative articles at
👉 Follow us on:
► Facebook:
► Twitter:
► Instagram:
► LinkedIn:
Another promising and blockbuster content video. Thank you ET M😘
Our pleasure! Glad you enjoyed it.
Apart from your presentation.. you always present the quality content in a nutshell.. appreciable ..
Thanks a ton. Glad you are liking our video content
Fantastic in depth analysis. Keep sharing such videos ….Thank you !
Most welcome. Thanks for your appreciation
Thanks so much for giving clarity. Was planning to invest in US based fund for months, but not sure where to invest S&P 500 or Nasdaq. Watched many videos on youtube and then wished may be someday i will get this comparison on ET Money youtube channel.
Thank you. Please supplement this learning with our video on “International Funds”. You will find it useful .. https://www.youtube.com/watch?v=qRT917PvEns
Very crisp and clear info. This was the actual info that I was looking for from past few days to choose between S&P500 and NASDAQ 100. Thanks for the excellent presentation 👌👍🏻
Glad it was helpful! Thanks Sachin KN
⁰⁰0⁰
Congratulations for another Great video. You’ve made it easier for retail investors to decide where to put their money, depending on their goals. Now even for International funds 👍🏻
Thanks. Please also watch our video on “International Funds”. It covers over 40 schemes and has an excellent excel worksheet whose link is in that video’s description https://www.youtube.com/watch?v=qRT917PvEns
This channel provides such great content that i have made a whole playlist dedicated to ETMoney. Thank you ETMoney and Team 🙂
Our pleasure! And thanks for your continued patronage
@ETMONEY Will continue to support my level best. This channel is too good to be missed out.
Thank you Sir, you have explained well 👍
You are most welcome. Thx
This further helps sealing my belief in MO S&P 500 for diversification 👍
Currently accounts for only 5% of my monthly SIP, will soon increase it to 10% next year
Very nice explanation & excellent clarity.Can you please suggest good ETFs for US markets & non US markets. I am an NRI & I invest directly into Vanguard S&P 500 fund VOO.I want to further diversify into outside US markets.Major chunk of my investment is in Indian mutual fund @ 60% and 40% in US markets.Awaiting response.
Look at vanguard or now HDFC too has an MSCI world index fund
To the point explanation , which is very clear and easy to understand. The way the things are explained helps to gain knowledge as well as opens our vision to think differently in terms of investments.
Thank you.
It’s our pleasure. Thank you for your kind appreciation
There may still be dilemma forfew to make a choice between the two- NASDAQ 100 and S & P 500. But the scale tilts towards NASDAQ 100, which is tech heavy and as tech has almost come to occupy a pivotal place not only in our daily life,but also in business world. So tech’s central place cannot be ignored. Further, technology companies were and to some extend still are mainly know as softaware companies, having influence in limited areas such as business ,atleast in India. But modern giant companies of NASDAQ have grown much beyond, encompassing everything in products,services,designing,utilities, transport and manufacturing to name a few. With fantastic developments due to innovations in next-gen tech,the power and influence may only increase. So while the existing companies may grow bigger, many other companies may also grow or newer companies may be included in the index due obsoletion of many companies. Even if S & P companies may grow, still the tech companies from NASDAQ would gain. So , the choice tilts more towards NASDAQ-100.
Increasing awareness among the retail investors and presenting to the point information without any bias. Kudos!
Thank you Gaurav Bansal
very very well explained, thank you very much Sir.
You are most welcome. Thanks for your kind words
Very informative videos like your many other pearls. Thank you. Keep up the good work. Simplicity, genuineness, supreme quality content and knack of knowing the pulse of the common investor and addressing their concerns amazingly.
Thank you very much, Rajeev Nair
Thank you for this explanation sir. Would you be able to comment on whether I should invest in ETFs both in the Nasdaq100 and S&P500 if I can afford it? Or whether I should stick with just one?
Most welcome. That’s for you to decide now that you have the necessary information with you on both these indices.
I chose both…
Very knowledgeable And wonderful video. Hats off to ET Money Team.
I wanted to invest in US stock market but was confused bw These 2 Indexes. Now Everything is crisp n clear.
Glad it was helpful! Thanks for your kind words
Love your channel! One question, I’m in US having US stocks but will be settling down in India soon. Can I port them over and continue managing then from India?
Thank you. You’ll need to check that with your trading platform.
I am sailing in a similar boat. I think the answer is yes but capital gains need to be filed in India.
Thanks for the great video Sir.
Provided with a good insight of US Stock Market.
Pls make video on Comparing various indian MFs investing in US Stocks.
Thanks. We already have a video on different mutual funds that invest internationally. Pls watch https://www.youtube.com/watch?v=qRT917PvEns
@ETMONEY Thanks for replying. You really made my research easy
Really nice distinction with concise emphasis on the important points.
Thank you!