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The NASDAQ, an acronym for National Association of Securities Dealers Automated Quotations, stands as one of the world’s most significant stock indices, particularly for the technology sector.
Established in 1971, NASDAQ serves as a key reference point for investors focusing on U.S.
tech companies, capturing increasing interest over the years due to its remarkable performance.
Despite the surge in artificial intelligence, the core focus of NASDAQ remains information technology, which continues to dominate the index.
However, other sectors like biotechnology and robotics, while still representing a smaller portion of the index, are gradually gaining traction among investors.
Over the past decades, NASDAQ has demonstrated impressive growth, with an annual performance rate that merits attention.
In the 1990s, the index experienced a meteoric rise during the “dot-com bubble.” More recently, from 2010 to 2020, NASDAQ capitalized on the advancements in cloud computing, AI, and the proliferation of mobile devices.
Over the last decade (2013 to 2023), the index has recorded an average annual growth rate of approximately 16-20%.
The ascension of NASDAQ is primarily attributed to the significant weight of a handful of large companies that substantially impact the index.
The top 10 companies by market capitalization disproportionately influence the overall performance of the NASDAQ-100, representing over 50% of the index’s total market cap.
This indicates that a downturn in one of these corporations can adversely affect the entire index.
For instance, if Apple or Microsoft faces a negative trading day, it can trigger a bearish trend in NASDAQ, even if many other companies are performing well.
NASDAQ Capital Market Composite encompasses companies with smaller market capitalizations that are not part of the NASDAQ-100.
Unlike the NASDAQ-100, which has thrived due to its tech giants, the Nasdaq Capital Market has shown increased volatility and currently hovers at historic lows.
This reflects the struggles of small and medium enterprises outside the tech elite, implying that the overall market might be weaker than it appears if we only consider the giants of NASDAQ.
An intriguing ETF to consider for those seeking exposure to emerging NASDAQ firms is the Invesco Nasdaq Next Generation 100 ETF (QQQJ).
This fund mimics the performance of companies that may one day join the ranks of the NASDAQ-100.
It presents an opportunity to capture the potential of promising market leaders that have not yet reached the size of the tech behemoths but exhibit strong growth prospects.
In summary, the Invesco Next Generation 100 ETF is a compelling tool for stock picking in anticipation of future market stars.
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