Nasdaq 100 Index Fund

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Nasdaq 100 Index Fund

Overview: Index funds based on the Nasdaq 100 Index are a good choice for investors who want exposure to some of the biggest and best technology companies without having to pick winners and losers or analyze specific companies.

The fund is based on the 100 largest companies on the Nasdaq, meaning they are among the most successful and stable. Such companies include Apple and Alphabet, which each make up a large portion of the overall index. Microsoft is another well-known member company.

To whom do they benefit? The Nasdaq 100 Index Fund is a good choice for stock investors looking for growth and willing to deal with large swings. Investors should be able to commit to holding for at least three to five years. Purchasing index funds using dollar-cost averaging helps reduce risk compared to a one-time purchase.

Risk: Like any publicly traded stock, this group of stocks could decline. While the Nasdaq 100 contains some of the most powerful technology companies, these companies are also typically the most highly valued.

Such high valuations mean they are likely to fall quickly during a downturn, although they can rise quickly during a recovery.

Returns: Nasdaq 100 Index Funds give you instant diversification so your portfolio isn't affected by the failure of any one company.

The best Nasdaq index funds charge low expense ratios and are an inexpensive way to own all the companies in the index.

Where to get it: Nasdaq 100 index funds are available in both ETF and mutual fund forms. Most brokers allow you to trade ETFs without commissions, while mutual funds may charge commissions and have minimum purchase amounts.