The Nasdaq 100‘s filled with America’s largest and finest expertise shares. Whereas most traders observe the S&P 500, this progress index has really been a a lot stronger performer during the last 5 years. And by chance for UK traders, there are many London-listed index trackers to choose from. In different phrases, British traders can simply capitalise on the returns of US tech giants.

The Nasdaq’s efficiency has been exemplary. However it’s essential to notice that the journey has additionally been fairly risky, particularly by comparability to indices just like the FTSE 100 and even FTSE 250. Nonetheless, traders who held on by means of the storm have made fairly a considerable return.

So how a lot may they’ve made in the event that they’d invested £5,000 in a low-cost index tracker again in December 2019?

Nasdaq’s five-year return

At first of December 2019, the Nasdaq 100 sat at round 8,400 factors. Nonetheless, being residence to a few of the most risky and pricy tech shares, this shortly crashed to underneath 7,000 inside a number of months as soon as the pandemic took over the world.

Whereas tech shares shortly recovered, rising rates of interest and inflation despatched all of them tumbling once more through the 2022 inventory market correction. In reality, the Nasdaq 100 suffered one other 30% drop all through this era. As beforehand said, it’s a risky index.

Nonetheless, even with all this volatility, the index now stands at simply shy of 21,000 factors. Which means traders have earned a powerful 150% return during the last 5 years. This acquire will increase to 160% when dividends are included.

By comparability, the S&P 500 has delivered simply shy of 110% over the identical interval. Which means traders who put £5,000 within the Nasdaq 100 5 years in the past are actually sitting on £13,000 versus the £10,500 delivered by the S&P 500.

What’s driving the returns?

The Nasdaq is a market-cap-weighted index. Which means the biggest firms have the most important affect on its efficiency. And proper now the biggest 5 shares are liable for virtually 35% of the index’s returns. The most important amongst them is Apple (NASDAQ:AAPL).

The patron tech large wants no introduction. By itself, the enterprise has vastly outperformed its dad or mum index, producing a 252% acquire even earlier than factoring in dividends.

With inflation cooling, analysts are projecting a surge in client digital spending subsequent 12 months with requires a brand new wave of cellular machine improve spending. Put merely, the corporate’s subsequent iPhone could possibly be set to fly off the cabinets, particularly with its improved synthetic intelligence (AI)-powered capabilities. And when paired with its thriving providers section, together with digital funds, this progress could possibly be simply the tip of the iceberg in the long term.

Nonetheless, the agency isn’t with out its flaws. With a powerful dependence on the Chinese language market, the US enterprise wants to stay beneficial with the Chinese language authorities. And that might show tougher underneath a Trump presidency whose anti-China stance isn’t precisely a secret.

Apple isn’t the one enterprise driving the returns of the Nasdaq 100. And there are many others buying and selling at lofty multiples on the expectation of future progress. As such, the index’s popularity for volatility isn’t prone to change any time quickly.