Q. Which is better for long term investment: S&P 500 index fund or Nasdaq index fund?
A. If your goal is to build a diversified long term investment portfolio, it's probably good to include both. However, if you want to pick one from the two, S&P 500 index fund is the better one, because it's well diversified, for two reasons:
1. Largest 500 companies on both NYSE and Nasdaq
S&P 500 includes the 500 largest stocks listed on both NYSE and Nasdaq. As a comparison, the most popular Nasdaq index - Nasdaq 100, only tracks 100 the largest non-financial service companies listed on Nasdaq.
2. Across many industries
S&P 500 includes companies across many industries, but tech companies account for about 60% of Nasdaq 100 weighting, just two companies - Apple and Microsoft - account for 20%+, making it less diversified than S&P 500 index, because anything happens to these large tech stocks, the index will plunge.
Next blog post we will discuss which S&P 500 index fund to choose, because there are a few dozens of them on the market today.
A. If your goal is to build a diversified long term investment portfolio, it's probably good to include both. However, if you want to pick one from the two, S&P 500 index fund is the better one, because it's well diversified, for two reasons:
1. Largest 500 companies on both NYSE and Nasdaq
S&P 500 includes the 500 largest stocks listed on both NYSE and Nasdaq. As a comparison, the most popular Nasdaq index - Nasdaq 100, only tracks 100 the largest non-financial service companies listed on Nasdaq.
2. Across many industries
S&P 500 includes companies across many industries, but tech companies account for about 60% of Nasdaq 100 weighting, just two companies - Apple and Microsoft - account for 20%+, making it less diversified than S&P 500 index, because anything happens to these large tech stocks, the index will plunge.
Next blog post we will discuss which S&P 500 index fund to choose, because there are a few dozens of them on the market today.
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