Your Questions Answered: What is the difference between index mutual funds tracking S&P 500 and Nasdaq 100?
Q. I am a software engineer working at the second headquarters of a global MNC in Hyderabad, my wife is also a software engineer running a small app development start-up. We have been investing in the Indian stock market for the past 7 years. However, the market has been erratic for the past 1-2 years. We are now planning to diversify our mutual fund investment into foreign funds too. We are planning to invest in international index mutual funds tracking US indices launched by several Indian mutual fund houses. At present, we are confused between the S&P 500 and the Nasdaq 100. Can you please throw some light on the differences between the two indices and the pros and cons of investing in international mutual funds?
Mohit Deshpande, Panjagutta, Hyderabad, Telangana.
The S&P 500 is a US stock market index that tracks the 500 largest companies listed on stock exchanges in the United States. It is one of the most popular and widely followed stock market indices in the world and is considered to be a good barometer of the overall U.S. stock market.
The S&P 500 is a market-capitalization-weighted index, which means that the largest companies in the index have the biggest impact on its performance. The index is rebalanced quarterly to ensure that the largest companies remain in the index and that the index accurately reflects the U.S. stock market.
The Nasdaq 100 on the other hand is a stock market index that tracks the 100 largest non-financial companies listed on the Nasdaq stock exchange. It is a technology-heavy index, with companies from the technology, healthcare, and consumer discretionary sectors accounting for a large portion of its weight.
The Nasdaq 100 is also a market-capitalization-weighted index, but it
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