What is the NASDAQ 100 ? A Quick Guide

New to investing? Want to ensure your money is going to the right places? Even if you’re a novice, you’ve likely heard of the NASDAQ 100. But what is it, and what type of companies can you find in it?

There’s a lot you should know, so we’ll get you all caught up with this quick guide. We’ll cover the companies in the NASDAQ 100, including the top 5 holdings. We’ll also shed some light on interesting facts about the NASDAQ 100 and go over the best trading platforms to use when you want to start investing in the NASDAQ 100 index.

What is the NASDAQ 100 Index?

The National Association of Securities Dealers Automated Quotations (NASDAQ) is the second-largest stock exchange in the country behind the New York Stock Exchange. It was launched back in 1985, making it also the world’s oldest electronic stock market. Originally, it was introduced as an alternative to the NYSE.

Among the world’s premier growth indexes, the NASDAQ 100 (NDX) comprises 100 of the largest enterprises out there. These companies don’t include any monetary industries but rather focus on retail, tech, and healthcare. Some companies within the index you may recognize include:

  • Amazon
  • eBay
  • Whole Foods
  • Marriott
  • Google

NASDAQ uses an open-market trading system and is run by NASDAQ, Inc.

The index weighs each company based on the total market value of the shares it has. As daily stock prices change, so will a company’s weighted index.

What Type of Companies Are in the NASDAQ100 Index?

While the NASDAQ 100 consists of shares from companies in various non-financial industries, there’s a separate index for these companies. It’s called the NASDAQ Financial-100 and comprises mortgages, insurance companies, brokers, and banks.

As for the NASDAQ 100, you’ll find companies from all sorts of sectors, including the following:

  • Transportation
  • Retail
  • Industry
  • Technology
  • Telecommunications
  • Media and Services
  • Health

To break it down even further, we can explore the index’s composition by looking at the percentage that each sector holds. For example, in March 2020, consumer goods made up about 5.5%, with industrials just ahead at 6.85%. Health care accounts for about 10%, while consumer services make up nearly 20%. The biggest sector on the index by far is technology, coming in at 48.4%. Finally, utilities and telecommunications make up for less than 2% combined.

If it’s not related to finance, it’s probably covered in the NASDAQ 100. For example, there’s Tesla, Starbucks, Netflix, Costco, Walgreens, and Ross. None of these companies have anything to do with each other besides all being in the top 50 companies of the NASDAQ 100.

Top 5 Companies in the NASDAQ 100

The top five companies listed in the NASDAQ 100 are going to be the top holdings. To come up with the top five spots, the index uses a modified capitalization methodology. This weighting system limits the influence of the largest companies on the list to balance them with the other members.

NASDAQ reviews the index’s composition each quarter first. If their distribution requirements aren’t met with the current standing, they’ll make adjustments accordingly.

Right now, the top five companies are as follows:

  1. Apple Inc. — Its symbol is APPL, and its weight is 12.263.
  2. Microsoft Corp — Its symbol is MSFT, and its weight is 11.671.
  3. Amazon com Inc — Its symbol is AMZN, and its weight is 8.583.
  4. META Inc — Its symbol is FB, and its weight is 4.865.
  5. Alphabet Inc — Its symbol is GOOG, and its weight is 4.587.

Note that the sixth top company is also Alphabet Inc. Alphabet, Inc. is Google’s holding company, and they have two share classes. Their Class C (GOOG) shares earned the fifth spot, while the company’s Class A shares (GOOGL) got the sixth spot.

Interesting Facts About the NASDAQ 100

There’s a lot to know about the NASDAQ 100, but we’ll try to sum up the interesting and most important parts for you here with a few bullets:

  • The process for listing is incredibly selective. Requirements are stringent, and most companies won’t make it on.
  • While called the NASDAQ 100, it’s actually made up of a few more than that due to companies like Google creating separate classes of shares.
  • Investors around the world can invest in the NASDAQ 100. It’s not limited to just the U.S.
  • It’s commonly referred to as the “technology” index due to the high percentage of tech companies found on it.
  • Even the smallest companies listed on the NASDAQ 100 index are typically larger than the smallest of large-cap benchmarks.

Conclusion — How to Trade on the NASDAQ 100 Index

If you want to get in on the NASDAQ 100 action, there are various trading platforms for you to choose from.

eToro is the world’s leading social trading and investing platform that makes trading indices simple. Once you make an account, you can access the full list of indices and find the NASDAQ 100.

From there, you’re just a few clicks of a button away from trading and potentially seeing big profits from huge players.

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