The Nasdaq 100 Index is a basket of the 100 largest and most actively traded American companies listed on the Nasdaq Stock Exchange. The index includes companies from various sectors except the financial sector, such as commercial and investment banks. These non-financial sectors include retail, biotechnology, industry, technology, healthcare and others.
Weighting of the index
The index is built on a modified capitalization methodology. This modified method uses individual weights of the items included according to their market capitalization. Weighting allows constraints to limit the influence of larger companies and to balance the index with all members. To do this, the Nasdaq reviews the composition of the index each quarter and adjusts the weights if the distribution requirements are not met.
Trade the Nasdaq 100 index
The Nasdaq 100 is traded through the Invesco QQQ Trust. This product is designed to track the performance of the 100 largest companies on the Nasdaq stock market. Each company in the trust must be a member of Nasdaq 100 and be listed on the broader stock exchange for at least two years. In addition, listed shares must have an average daily trading volume of 200,000 and publish their results quarterly and annually.
Some exceptions are made for new public companies that have extremely large market capitalizations. Companies with bankruptcy problems are omitted from the Invesco QQQ Trust. Occasionally, the composition of the trust may not match the index identically, but the main objective of the QQQ is always to track the price and performance of the underlying index.
Composition of the Nasdaq 100 index
The Nasdaq 100 index is made up of assets in various sectors, excluding financial services. A large part of the index covers the technology sector, which represents 54% of the weight of the index. The second largest sector is consumer services, represented by companies such as restaurant chains, retailers and travel services. These shares represent almost a quarter of the weight of capitalization thanks to the continued growth of the retail giant Amazon (AMZN). To complete the index, health care, industries and telecommunications. The diversity of companies included in the Nasdaq 100 has helped generate solid returns over the past two decades.
To be included in the Nasdaq 100, index securities must be listed exclusively on a Nasdaq exchange. This may include common stocks, common stocks, American certificates of deposit (ADR) and tracking stocks. Twenty-seven countries are linked to the companies represented in the index. Other reasons for inclusion include market capitalization and liquidity. Although there is no minimum market capitalization requirement, the index itself represents the 100 largest companies listed on the Nasdaq.