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stocks in the US Nasdaq The index is also making headlines here in the UK. We can't have gotten lost NVIDIA (NASDAQ: NVDA), with a market cap of nearly $3.4 trillion (yes, trillion). It is worth more than all the companies in the world. FTSE 100 set.
AND tesla He always seems to get a mention. Tesla's share price is up 31% since the US election. Tesla is still far behind Nvidia's rise over the past five years:
<h2 class="wp-block-heading" id="h-flying-tech–stocks“>Flying tech stocks
On Friday (November 22) the Nasdaq closed at 19,003 points. As of the same date in 2019, it ended at 8,520 points. That's a 123% gain.
My imagined £5,000 invested in a low-cost Nasdaq index tracking fund back then would be worth around £11,300 today. There would be some small charges for managing the fund. But the Nasdaq pays an average dividend of about 1.8%, so I'll treat them as cancelled.
My key, and what's surprising, is how small that gain is. I mean, this is the index that provides multiple overnight bags, right?
Index comparison
During the same five years, the largest S&P 500 is up 92%, just behind the Nasdaq. The dividend yield is similar, around 1.2%.
Based on this, the S&P seems like a better index to follow than the Nasdaq, if only because of its lower risk. But that's just five years ago.
Turning back the clock a decade, the S&P 500 has gained 189%, but the Nasdaq is up a whopping 303%. So before deciding which one to pursue, I would carefully examine multiple time scales and think about my own investment horizon.
My £5,000 invested in a Nasdaq tracker 10 years ago could be worth £21,500 now. And the same amount invested when the technology Index began in February 1971 could have risen to £948,600. Not that my pocket money reached five thousand dollars back then, of course.
Concentration
But that five-year return seems disappointing, but it reminds me of a major lesson. Nasdaq's gains are concentrated in a few key stocks.
Right now, it's mainly about the so-called 'Magnificent Seven'. They are Nvidia and Tesla, along with Apple, microsoft, amazon.com, Alphabetand Metaplatforms. All of them have artificial intelligence (ai) in common.
CNBC runs its own Magnificent 7 index, and it's up 320% since it started in December 2022.
Nasdaq Leader
Going back to Nvidia, what we see is a gain of 2,549% over five years. And to get an idea of where that growth came from, the company posted total revenue in 2020 of $10.9 billion.
Then, in the year to January 2024, total revenue had reached a whopping $60.9 billion. Revenue for this year's third quarter, reported on Nov. 20, reached $35.1 billion. That's just in one quarter. Still, as it looks like growth might slow down a bit, investors were not satisfied and the price dropped a bit.
As investors, we need to be aware that Nasdaq growth is often concentrated in a small number of stocks. The index can also be very volatile and is not really for those who do not want to take risks.
Still, if I had put a shilling in it in 1971…
