The NASDAQ-100 Index is one of the most widely followed stock market indexes. The NASDAQ-100 Index is made up of the top 100 non-financial stocks that trade on the NASDAQ stock exchange based on market capitalization. To be eligible a stock must be:
The NASDAQ-100 Index is reconstituted annually on the third Friday in December. An existing index stock is not automatically removed from the index if the stock is ranked 100 to 125 in terms of market capitalization, unless the stock was also ranked 100 to 125 in the previous year.
There are now hundreds of companies that prepare stock market indexes, but NASDAQ is one of the four companies that dominate the index industry, along with MSCI, FTSE Russell, and Standard & Poor's. You can get a pretty good gauge of the index industry by looking at the number of exchange traded funds that are tracking indexes from particular index providers - see list of index providers for ETFs.
On our website, we use the GICS sector classification system to classify stocks into sectors. The NASDAQ-100 Index is unique for a "broad market" stock market index, because the NASDAQ-100 Index does not include stocks from all GICS sectors. In fact, the NASDAQ-100 Index is heavily focused on the Information Technology, Consumer Discretionary and Communication Services sectors.
Let's look at the current breakout of the NASDAQ-100 Index by sector:
|GISC Sector||# of Stocks||Market cap||%||# of Stocks||Market cap||%|
When we say "total market" in this article, we are talking about all common stocks, REITs and mortgage REITs of U.S. companies that trade on the U.S. stock market. So that excludes MLPs, preferred stocks, ADRs, and investment funds, and the common stocks of non-US companies that trade on the U.S. stock market. In terms of market capitalization, the NASDAQ-100 Index currently captures 35.5% of the total market.
Note that the NASDAQ-100 does not include stocks from the financials sector by design, as explained above. But the fact that so many other GICS sectors are not represented is mostly just an accident, in that stocks from the other GICS sectors have never gotten big enough in terms of market capitalization to crack into the top 100. Or said another way, the large companies in those other GICS sectors have their stock listed on the New York Stock Exchange, not the NASDAQ.
The NASDAQ-100 has performed really well during the past ten years, as shown using QQQ, the NASDAQ-100 ETF:
Why has it performed so well? Probably because the NASDAQ-100's sector mix in many ways has been "perfect", in the sense that it has matched the technology explosion that has happened in the U.S. during the past twenty years. One quirk of the GICS sector classification system has been that certain "technology" companies like Amazon, Netflix and Comcast are actually classified in the consumer discretionary GISC sector. Yet the NASDAQ-100 includes these companies. So, the NASDAQ-100 often outperforms even indexes that focus on the information technology sector of the GICS system.
For example, let's look at the performance of QQQ, the Powershares QQQ ETF, which tracks the NASDAQ-100 Index, with XLK, the SPDR Information Technology Select Sector ETF, which tracks an index of all stocks in the S&P 500 Index that are in the GISC information technology and telecommunications sectors:
Whether by design, or by accident, the NASDAQ-100 Index has turned out to be a "perfect" technology play on U.S. stocks. The make-up of the index could change over the years, but it probably won't change very quickly, as large U.S. companies generally do not switch their stock exchange listing from one stock exchange to another very often.
The NASDAQ-100 Index is considered to be a "large cap" or "large capitalization" stock index. But as explained in our article size categories, there is no standard definition of what makes up a "large cap" stock. Each of the major index providers (MSCI, S&P, NASDAQ, FTSE Russell) uses a different approach to build "large cap" indexes. On our website, we use a cutoff of $10 billion to determine a large cap stock. This is a just a widely used rule of thumb that we have also chosen to use. Similarly, a "mid cap" stock under our definition is a stock with a market capitalization between $2 billion and $10 billion.
Let's look at the stocks in the NASDAQ-100 Index based on the size categories we use:
|Size Category||# of Stocks||Market cap||%||# of Stocks||Market cap||%|
The NASDAQ-100 Index is also somewhat unique because American Depository Receipts, or ADRs, of non-U.S. companies are eligible for inclusion. Most popular stock market indexes like the S&P 500 and the Russell 1000 exclude ADRs. However, ADRs do not really make up a significant portion of the NASDAQ-100 index:
|Security Type||# of Stocks||Market cap||%|
Here are the ADRs included in the NASDAQ-100 Index:
|ASML||ASML Holding NV ADRs||Information Technology||The Netherlands||$269,267,047,597||Analyze|
|BIDU||Baidu Inc ADRs of Class A||Communication Services||China||$68,137,929,000||Analyze|
|JD||JD.com Inc ADRs||Consumer Discretionary||China||$117,479,053,809||Analyze|
|NTES||NetEase Inc ADRs||Communication Services||China||$74,416,319,746||Analyze|
|PDD||Pinduoduo Inc. ADRs||Consumer Discretionary||China||$152,416,679,807||Analyze|
|TCOM||Trip.com Group Limited ADRs||Consumer Discretionary||China||$24,334,069,368||Analyze|
The NASDAQ-100 Index historically has had a dividend yield of around 1.00%. Generally, the technology growth stocks in the NASDAQ-100 Index have a lower dividend yield than the stock market as a whole. Using the data in our database as of today, here are the current market capitalization weighted average dividend yields of the NASDAQ-100 compared to the S&P 500 Index, Russell 1000 Index, the Russell 2000 Index (i.e. small cap stocks) and the stock market as a whole:
|Category||Stock Count||Average Dividend Yield|
The Russell 2000 Index consists of the smallest 2,000 U.S. common stocks in the Russell 3000 Index, which includes the largest 3,000 U.S. common stocks based on market capitalization. The Russell 2000 Index is one of the most popular "small cap" indexes.
Let's look at the performance of the NASDAQ-100 Index using QQQ, the PowerShares QQQ ETF. As explained above, the NASDAQ-100 Index mostly consists of large cap stocks. How does the performance of the NASDAQ-100 compare to the S&P 500 Index, the most popular large cap stock market index? Let's compare the performance of QQQ to SPY, the SPDR S&P 500 ETF.
First, let's compare the market price of QQQ to SPY:
Second, let's compare the total return of QQQ to SPY:
Note that on our website, when you see a "-TR" symbol, such a symbol is a symbol we invented that references our calculations of the total return of an exchange traded fund (ETF). The total return symbol, or "-TR" symbol, includes the market price performance plus any dividends from that ETF reinvested.
The takeaway from the above charts is that the technology stocks in the NASDAQ-100 have performed really well in recent years. One way to visualize this is to look at a "ratio symbol" that shows the market price of QQQ divided by the market price of SPY:
Because the NASDAQ-100 Index is so widely followed, there are a lot of exchange traded funds ("ETFs") that track the NASDAQ-100 Index:
|Symbol||Description||Inception Date||Leverage Factor||Market cap|
|PSQ||ProShares Short QQQ ETF||06/19/2006||-1.00||$536,823,125||Analyze|
|QID||ProShares UltraShort (2x) QQQ ETF||07/11/2006||-2.00||$233,752,957||Analyze|
|QLD||ProShares Ultra QQQ ETF||06/19/2006||2.00||$4,233,174,000||Analyze|
|QQQ||Invesco QQQ ETF||03/10/1999||1.00||$158,312,784,500||Analyze|
|QQQM||Invesco NASDAQ 100 ETF||10/13/2020||1.00||$823,550,700||Analyze|
|SQQQ||ProShares UltraPro Short QQQ (3x) ETF||02/09/2010||-3.00||$1,748,612,480||Analyze|
|TQQQ||ProShares UltraPro QQQ (3x) ETF||02/09/2010||3.00||$11,050,267,500||Analyze|
All data is a live query from our database. The wording was last updated: 02/21/2019.
2021 © Stock Market MBA, Inc.