The Nasdaq 100 Index is a collection of the top 100 most actively traded US companies on the Nasdaq stock exchange. It contains 100 of the top non-financial firms based on market capitalization and is known as a tech-heavy index. Apart from technology companies, the index includes companies from significant industry areas such as industrials, consumer goods, healthcare, consumer services, telecommunications, and utilities. It excludes equities of banks and financial institutions, including investment firms.
Why consider the NASDAQ 100 fund?
The Nasdaq 100 index is unique in that many of the companies in it are innovators with high cash flows and market share dominance. 62 Nasdaq 100 businesses have recently submitted patents in high-growth areas including artificial intelligence and sustainable energy. The recent severe decline, according to fund managers, may be an ideal opportunity to begin investing in a staggered fashion.
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How is the index weighted?
The index is built using a capitalization approach that has been modified. Individual weights of included goods are assigned according to their market capitalisation in this updated strategy. Weighting allows for limits that minimise the effect of the larger corporations while still balancing the index. Nasdaq does this by reviewing the index's composition every quarter and adjusting weightings if the distribution requirements aren't met.
How can Indians invest in the NASDAQ 100 Index?
A Nasdaq 100 fund of funds, offered from a number of mutual fund institutions, can be purchased by an Indian investor. Investors have the option of making a one-time lump-sum investment or investing on a regular basis through a systematic investment plan (SIP). While most overseas mutual funds have stopped accepting new money once the $7 billion industry maximum was reached, numerous local MF schemes that invest in the Nasdaq 100 are still accepting new money. This is due to a different cap of $1 billion for overseas Exchange Traded Funds (ETFs).
What is the eligibility criteria to do so?
Index securities must be exclusively listed on a Nasdaq exchange in order to be included in the Nasdaq 100. Common stocks, ordinary shares, American depositary receipts (ADRs), and tracking stocks are all examples of this type of investment. Companies represented in the index are linked to twenty-seven nations. Market capitalisation and liquidity are two further reasons to be included. The index itself covers the top 100 largest firms listed on the Nasdaq, with no minimum market capitalization requirements.
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What are the top holdings and what is the sectoral allocation?
The technology sector has the biggest Nasdaq 100 exposure (49.5%), followed by consumer services (16.34%), and consumer discretionary (17.11%). Apple, Microsoft, Amazon, Tesla, and Alphabet are the top five Nasdaq 100 stocks.
Why is it getting all the attention?
The Nasdaq has lost 23 percent since January 1, one of the steepest sell-offs since the dot-com crisis in 2000-01. US technology firms, who had been among the top gainers in the past decade, have been crushed in 2022. Investors have become wary of highly valued and high-growth technology businesses as interest rates have risen.
The Invesco QQQ Trust is where you may buy and sell the Nasdaq 100. The purpose of this product is to track the performance of the Nasdaq's top 100 companies. The trust's companies must all be Nasdaq 100 companies. Additionally, listed equities must have a daily trading volume of 200,000 and must publish quarterly and annual results reports.
Newly public firms with extraordinarily large market capitalizations are exempted from the rule. The Invesco QQQ Trust excludes companies that have had bankruptcy concerns. The trust's composition may not always match the Index, but the basic goal of the QQQ is to track the underlying index's price and performance.