Someone years back decided to convince people who are bad at math that the Nasdaq is a good representation of the stock market, explains JC Parets of AllStarCharts.com.
As every day passes, particularly in 2022, the market continues to prove how silly that whole thing is. Whatever you need to do to remember it, do not ever forget:
The Nasdaq is not the stock market. It's just one index, of many, that is irresponsibly weighted towards a certain type of stock and completely ignores the other ones. As a reminder, the Nasdaq 100 is about 50% Technology.
And just keep in mind that this massive Tech weighting doesn't even include Amazon (AMZN), Google (GOOGL), Facebook (META), or Tesla (TSLA), as those companies aren't even considered Technology. They're in the Consumer Discretionary and Communications Sectors.
Furthermore, the Nasdaq 100 has a 0% weighting in Financials, 0% weighting in Energy, 0% weighting in Materials, 0% weighting in Industrials, and 0% weighting in Real Estate. Repeat after me: The Nasdaq is not the stock market.
And I'll tell you something else that's pretty hilarious. The NASDAQ-100 Ex-Tech Sector (NDXX) still has infinitely more Tech exposure than Energy and some of those other ignored areas of the market:
So, I'll tell you again. If you want a lot of Technology exposure and you want to avoid all those other areas, then perhaps the Nasdaq can be a good vehicle for that specific purpose.
But as a gauge of the US Stock Market? I couldn't think of a worse index. Know what you own, that's the lesson.
Learn more about JC Parets at AllStarCharts.com.
