The National Association of Securities Dealers Automated Quotations – or NASDAQ for short – has been around since 1971. This US stock exchange is now the world’s second largest behind the New York Stock Exchange and features around 3,500 companies, with a strong focus on the information technology sector.
It is possible for UK investors to invest in the NASDAQ or individual NASDAQ-listed companies in various ways. But is this the right choice for you?
NASDAQ’s recent performance
In 2022 the NASDAQ Composite performed notably poorly – down 33.1% over the course of the year. Half of the index’s top eight companies saw share price declines of 50% of higher during 2022, with sources citing supply chain disruption, rising inflation and various other economic indicators as the cause.
In 2023, though, things are looking very different. As of the end of July the index had logged a return of 34.1%, outshining both the S&P and the Dow, thanks mainly to strong performance by tech and communications companies.
Historically, the NASDAQ has performed better than the S&P 500 – but past performance is, of course, no indicator of how the future will pan out.
Why do people invest in the NASDAQ?
One of the big draws of investing in the NASDAQ is the opportunity to invest in some of the world’s biggest companies. Businesses like Microsoft, Apple, Alphabet, Amazon and Tesla are all listed on this exchange: companies that have seen significant growth in recent years despite the pandemic and tricky economic climate.
It’s this ability to invest in innovative companies that drive US economic growth that appeals to many – with the possibility of high returns. However, with its potential for volatility, it’s an index that many see as a longer term investment, rather than one to provide short-term returns.
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