Among broad market equity indexes, the widely followed Nasdaq-100 Index (NDX) has a deep tradition of delivering outsized returns. That’s the result of the benchmark overweighting innovative companies, many with dominant competitive moats.
“The index leans heavy towards innovative companies that have become our ‘modern-day industrials,’ and accelerated by the pandemic, they play an even greater role in our daily lives. These include names like Apple (AAPL), Alphabet (GOOG) and Amazon (AMZN), as well as Netflix (NFLX), Zoom (ZM) and DocuSign (DOCU). Biotech companies, including vaccine maker Moderna (MRNA), are also well-represented,” according to Nasdaq Global Indexes.
In the US, the Invesco QQQ Trust (QQQ) is the prime avenue for accessing the Nasdaq-100. Yet the NDX still has a global reach – one that benefits an array of investors.
“Investors across the world have been able to benefit from NDX performance, thanks to the many exchange-traded products (ETPs) that track the Nasdaq-100 and which are offered globally,” according to Nasdaq.
Why NDX? Why QQQ?
Many QQQ components are using technology to disrupt the industries they are in. These companies use innovation techniques to create competitive advantages across multiple sectors and industries beyond tech. The coronavirus pandemic has also highlighted opportunities with tech stocks and QQQ.
Data even suggest NDX is playing a pivotal role in rising ETF adoption around the world.
“The Nasdaq-100 has achieved considerable gains during a challenging year. It outperformed the S&P 500 every quarter in 2020 on its way to over 30% excess return for the year, something that hardly seemed imaginable when the pandemic began to take hold,” adds Nasdaq. “The NDX’s rising tide has lifted all the boats of the ETPs that track the index globally from a performance perspective. Additionally, there has been overwhelming interest in existing and new products tracking the Nasdaq-100.”
Excluding QQQ, exchange-traded products linked to NDX took in $6 billion in new money last year.
“New product listings are a strong indicator of the strength NDX-tracking ETPs saw in 2020. In fact, 20 ETPs tracking Nasdaq-100 indexes were launched globally in 2020, ranging from ETF to exchange-traded note (ETN), as well as 1-beta, currency-hedged, leveraged and inverse, and options-based,” concludes Nasdaq. “This growth has been driven by the intention of market democratization and ensuring that more investors across the world have access to the Nasdaq-100 in their local market.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.