Dow Jones, S&P 500 Or Nasdaq? Which Stock Index Turned $10000 Into $70570 – Investor's Business Daily

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Trying to choose which major index and ETF to invest in: Dow Jones, S&P 500 or Nasdaq stocks? If you like to make money, the choice is simple.


The Nasdaq 100, which owns the 100 largest non-financial stocks trading on the Nasdaq Composite, is blowing away all the other U.S. stock indexes, says an Investor’s Business Daily analysis of data from Morningstar and MarketSmith. And it’s miles ahead not just in the short term, but the long-term, too.

It’s the only major U.S. index to turn $10,000 invested in 2010 to anywhere near $71,000 now, based on the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100. Had you put the same $10,000 in an ETF tracking the Dow Jones Industrial Average in 2010, your investment would be worth just $27,325 or 62% less now. Even $10,000 put into the S&P 500 in 2010 or SPY stock, the cornerstone of many portfolios, would be valued at just $31,238.

The reason? Concentration on winning large-company technology stocks. Now you can see why there’s such a rush into the QQQ ETF.

Sizing Up The Nasdaq Vs. The Dow Jones And S&P 500

The Nasdaq 100 is making the other indexes look like they’re sitting still. The Nasdaq 100 returned nearly 51% in just a year, topping the 17.6% return of the S&P 500 and 5.4% gain of the Dow. The Dow is actually down this year, while the Nasdaq 100 is up more than 37%.

It’s a similar story the past five years. The Nasdaq 100 returned 23% annually since 2015, while the Dow is up just 11% and the S&P 500 11.8%. And the longer term is the same script. The Nasdaq 100 returned 15.5% annually in the past 15 years. During that time, the Dow returned just 7% annually and the S&P 500 7.5%.

Looking Inside The Nasdaq’s Outperformance Against The Dow Jones

Wondering why the Nasdaq 100 is pulling so far ahead of the Dow Jones, S&P 500 and even the Nasdaq Composite? Look inside.

First, keep in mind investors are leaning strongly toward larger companies. And that’s something the Nasdaq 100 focuses on.

The average market value of stocks in the Nasdaq 100-based Invesco QQQ is nearly $900 billion. It’s dominated by giants like Apple (AAPL), Microsoft (MSFT) and (AMZN). The Nasdaq Composite, on the other hand, holds nearly 3,000 stocks with a much smaller average market value of just $7 billion.

Dow Jones, too, is focused on giant companies. And yet the SPDR Dow Jones Industrial Average ETF (DIA), which owns the Dow Jones stocks, is down 0.16% this year while the QQQ is up 37%. Why? Sectors matter. The Dow Jones puts just 24.6% in the perennially leading tech sector vs. 64% for the Nasdaq 100. And the Dow Jones puts 1.09% in energy stocks, suffering all year, while the QQQ puts in none.

What about the S&P 500? SPY stock puts more in technology than the Dow, 35.4%, but still less than the Nasdaq 100. And the S&P 500 is also held back by its 2.3% weight in energy.

Nasdaq 100, Up Too Much?

Some are starting to fear the Nasdaq 100 is becoming too much of a good thing. Money is pouring in, as it’s the top-performing, fastest-growing ETF. The QQQ is narrowing the gap, in terms of assets, with SPY stock. Invesco is promptly responding by launching related ETFs, one that’s 25% cheaper than the QQQ and one that owns smaller Nasdaq stocks.

Meanwhile, some of the Nasdaq 100’s top holdings, like Tesla (TSLA), are up so much eyebrows are rising.

“We wish Tesla shareholders and the company all the success in the world, but its outsize weighting in the QQQs and the (Nasdaq Composite) combined with its unusually high valuation and volatility make the stock a systematic risk to investor confidence,” says Nicholas Colas, Co-founder of DataTrek Research.

But until then, Nasdaq 100 investors can count their profits.

Nasdaq 100 Dominates The Dow Jones And S&P 500 Indexes

Index YTD Total Return* 5-Year Return* 15-Year Return* Growth Of $10,000 Since 2010
Nasdaq 100** 37.04% 23.03% 15.46% $70,570
Nasdaq Composite 30.55% 19.19% 12.27% $51,622
S&P 500 7.98% 11.83% 7.45% $31,238
Dow Jones -0.16% 10.70% 7.03% $27,325
 Sources: IBD, Morningstar, * – annualized, based on Invesco QQQ Trust ETF

Follow Matt Krantz on Twitter @mattkrantz


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