It is also ensured that sector balance is in line with the overall market cap of the listed companies on the exchange so that no sector has a disproportionately high weight in the index.Īlthough the top holdings include tech biggies such as Apple and Microsoft, the allocation to the sector combined is less than 30%. Apart from market cap, there are other criteria for stocks selection such as percentage of shares available for public trading, earnings growth, trading volumes (share price multiplied by the number of shares traded), etc. The market cap of the stocks is calculated by multiplying the number of shares available for trade on the stock exchange by the company’s stock price. The higher the market cap, the higher the weightage of the stock in the index. The weightage of companies that are part of the index is based on their market capitalizations. Therefore, S&P 500 index can be considered a broad indicator of the US equity markets. These companies combined represent more than 80% of the total market capitalization (total shares of a company multiplied by the number of shares) of the companies listed on the US stock exchange. The index is made up of stocks of the 500 biggest listed US companies. Launched in 1957, S&P 500 is one of the oldest indices of the US. This will help you select the fund that suits your risk and return profile. In this blog, we will explain what you get if you choose to invest in funds tracking either Nasdaq 100 or S&P 500 indices and how they differ in performance and portfolio. Therefore, if you are looking to invest in any of the funds tracking these indices, it will be helpful to understand the construct of these indices. This has resulted in a difference in the performance of the two indices over various periods. Nasdaq 100 and S&P 500 are both popular large-cap heavy indices, and you will find some similar names in their top holdings, but at the same time, they are pretty different from each other in terms of the number of companies they track, their weights as well as sector allocation. This is probably because Nasdaq 100 and S&P 500 are among the US equity markets’ oldest and widely followed benchmarks. Even the passive funds offered by Indian mutual funds are the ones tracking either of the two indices. If you are looking to invest in US equity markets through the mutual fund’s route, you will typically see that most funds benchmark their performance either against Nasdaq 100 or S&P 500 indices.
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