4 Ways To Invest In The NASDAQ 100 Stock Index

January 10, 2020

Investing

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If you look back over the past 25 years of stock market history you will find that it’s hard to beat the performance of the NASDAQ 100 stock index. The NASDAQ 100 is the 100 largest non-financial stocks that trade on the NASDAQ stock exchange. In general, it out performs the S&P 500 when the market is advancing and under performs the S&P 500 during periods of decline. Therefore, when the economy is improving many investors look for exposure to this index.

The most popular way to invest in the NASDAQ 100 is through the ETF which trades under the ticker symbol QQQ. This ETF is designed to track the performance of the NASDAQ 100 stock index less fees and expenses. It is one of the most popular ETFs trading about 50,000,000 shares per day.

In recent years another innovation in the ETF world has been the use of leverage. There is a 200% or 2x leveraged version that tracks the index and it trades under the ticker symbol QLD. The goal of this fund is to move up or down 2% (on a daily basis) for each 1% move in the NASDAQ 100 index (less fees and expenses).

For even more leverage ProShares also offers the 300% (3x) leveraged NASDAQ 100 ETF which trades under the ticker symbol TQQQ. These leveraged versions are popular with active traders but only trade a fraction of the volume of the QQQ.

The most leveraged way to gain exposure to the NASDAQ 100 is through the NASDAQ 100 stock index futures. The most popular version is the electronic E-Mini contract (ticker symbol NQ). This contract is valued at $20 times the index so if the NASDAQ 100 is at 2700 the total value of the contract is $54,000. Since the margin requirement to hold this contract is only $3500 at the current time, this give you 15 to 1 leverage which makes the leveraged ETFs look meek in comparison.

These leveraged products are designed for active traders and experienced professionals who monitor their positions closely. Long term investors are much better off in the QQQ which over time has out performed almost all other stock indexes. In fact, due to the fact that the NASDAQ 100 has a higher beta than the S&P 500 there is absolutely no reason why the average investor would want to add additional risk to their position.