What is the NAS100 Index?
The NAS100 index, also known as the NASDAQ-100 index, is a stock market index that includes 100 of the largest non-financial companies listed on the NASDAQ stock exchange. It represents a diverse array of industries, primarily focusing on technology, telecommunications, retail, biotechnology, media, and transportation sectors. The NASDAQ-100 index is widely followed as a benchmark for the performance of large-cap growth stocks in the technology sector and other innovative industries. It is often used by investors and analysts to gauge the overall health and direction of the technology-heavy segment of the stock market.
How is the NASDAQ 100 calculated?
The NASDAQ-100 (NAS100) index is calculated using a modified market capitalization-weighted methodology. The NASDAQ-100 index provides a snapshot of the performance of the largest and most actively traded non-financial companies listed on the NASDAQ stock exchange, primarily focusing on sectors such as technology, biotechnology, retail, and telecommunications.Top of FormBottom of Form
- Selection of Constituents: The index includes 100 of the largest non-financial companies listed on the NASDAQ stock exchange. These companies are selected based on their market capitalization and other criteria determined by NASDAQ.
- Market Capitalization Weighting: Each company included in the index is weighted based on its market capitalization. Market capitalization is calculated by multiplying the current share price by the number of outstanding shares of each company.
- Adjustments: The index is adjusted periodically to ensure it reflects the current composition of the market and the relative importance of each company. This may involve adding new companies that meet the criteria or removing companies that no longer qualify.
- Price Changes: As the share prices of the companies in the index change throughout the trading day, the index level is adjusted accordingly. Companies with larger market capitalizations will have a greater impact on the index’s movements.
- Dividends and Corporate Actions: Dividends paid by companies in the index and other corporate actions (like stock splits) can affect the index calculation. These adjustments are made to ensure the index accurately reflects the total return of its constituent companies.
- Index Calculation: The index level is calculated using a base value (usually 100) set at a specific date in the past. Changes in the aggregate market value of the index constituents relative to the base value determine the index level at any given time.
NASDAQ100 Companies – Sector Breakdown
The NASDAQ-100 index is predominantly influenced by the technology sector, comprising nearly 60% of its composition. Investing in the index is often viewed as a strategic position in the U.S. technology sector.
How to trade NASDAQ 100?
Trading the NASDAQ 100 through Contract for Difference (CFDs) offers a cost-effective and efficient method. Brokers typically provide two types of CFDs: one based on the cash index (US TECH) and another on the underlying futures contract (NAS100.fs).
With CFD trading, you can speculate on the direction of the NASDAQ 100 without owning it or its individual stocks. Leverage allows you to amplify potential gains or losses, and you have the flexibility to take both long and short positions.
This flexibility is particularly advantageous during market downturns. Instead of selling off portions of your portfolio, which can incur significant costs and timing challenges, you can use CFDs to profit from falling prices.
Choosing between the cash CFD (USTECH) and futures CFD (NAS100.fs) depends on your trading style. Short-term traders might prefer USTECH for its low spreads, while long-term traders may favour NAS100.fs due to the absence of swap charges.
The average return on the NASDAQ100
The average return on the NASDAQ 100 can vary significantly depending on the period considered and market conditions. To get a precise figure for the average return on the NASDAQ 100, you would typically calculate the compounded annual growth rate (CAGR) over a specific historical period. This figure can provide a clearer picture of the index’s performance over time, considering both capital gains and dividends.Top of Form
- Long-Term Performance: Over the long term, the NASDAQ 100 has historically delivered strong returns, driven by the growth of technology and innovative sectors. For example, from its inception in 1985 to recent years, the NASDAQ 100 has shown average annualized returns ranging from 8% to 10% after accounting for dividends and adjusted for inflation.
- Short-Term Volatility: In the short term, the NASDAQ 100 can experience significant volatility due to market cycles, economic conditions, geopolitical events, and sector-specific factors (such as technology trends or regulatory changes).
- Investment Horizon: The average return on the NASDAQ 100 also depends on your investment horizon. Investors with longer holding periods tend to capture more of the index’s overall growth potential, while short-term traders may experience more variability in returns.
- Risk Considerations: It’s important to note that while the NASDAQ 100 can offer attractive returns, it also carries risks, particularly related to the concentration in technology and growth stocks. Investors should carefully assess their risk tolerance and diversification strategies when investing in the index.
