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If you’re investing in US stocks, then you’ve probably come across the S&P 500 and the NASDAQ. But what’s the difference between the S&P 500 and the NASDAQ and which should you invest in? Let’s dive in and take a closer look.
The S&P500 and the NASDAQ are both indices of stocks and there’s a lot of overlap between the 2. Many of the top 10 stocks are the same, so if you’re invested in both, you may not be as diversified as you think. Here are the top 10 stocks in both indices.
List of top 10 stocks from each
NASDAQ
S&P 500
- Apple
- Microsoft
- Amazon
- Facebook inc A
- Alphabet Inc A (Google)
- Johnson & Johnson
- Berkshire Hathaway
- Visa
- Procter & Gamble
Which is the best investment, the NASDAQ or the S&P 500?
The best investment for you depends on your investment goals. Here’s a summary of what to consider:
- Are you looking for current income or future potential growth? If you want future growth then the NASDAQ may be suitable but if you want current income then the S&P may be more suitable.
- What is your attitude to investment risk? The tech heavy NASDAQ index tends to fluctuate more in price than the S&P 500 as it contains more growth stocks where the value is based on uncertain future income.
- What other investments do you hold in your portfolio? The S&P 500 and NASDAQ overlap so you need to check what else you hold within your portfolio if you want it to be diversified. If you want more exposure to tech stocks then the NASDAQ could be a good choice.
NASDAQ vs S&P 500 chart
NASDAQ vs S&P 500: Which is bigger?
The S&P 500 contains 500 of the biggest companies in the US whereas the NASDAQ Composite contains more than 3,000 stocks. However some NASDAQ companies are very small and the total value of the NASDAQ is lower than the S&P 500.
NASDAQ vs S&P 500: Which is worth more?
The S&P is worth an eye-watering $40.15 trillion and contains around 28% tech stocks. In contrast, the NASDAQ composite index is worth a grand total of around $19.4 trillion despite having over 3,000 stocks and contains around 50% tech stocks. That’s because it includes a large proportion of smaller tech companies.
NASDAQ vs S&P 500: Concentration
Both the NASDAQ and the S&P 500 are extremely concentrated, with the largest companies making up a big proportion of the total market value of the index.
For the NASDAQ, the top 20 companies are mainly tech giants and account for 47% of the overall value of the index. Likewise, the S&P 500 is extremely concentrated towards the biggest companies with just 4 companies making up nearly 21% of the S&P at the end of 2021.
NASDAQ vs S&P 500: Stock quality
Quality investing is where investors look for certain criteria in their investments. It’s based on management credibility as well as balance sheet stability and financial performance.
The S&P arguably contains a higher proportion of quality stocks than the NASDAQ index. That’s because they need to meet a strict verification criteria to be included in the S&P 500.
If you want to invest purely in quality stocks then you could choose the S&P quality index which is a pre-vetted group of quality companies which are selected based on return on equity and other financial ratios.
NASDAQ vs S&P 500: Which is more diversified?
Both indices are fairly diversified as you will spread your investment risk across many underlying US companies. But both indices are also heavily weighted towards the bigger companies. For example, if you invest purely in the S&P 500 index then 21% of your investment will be in the top 4 biggest companies in the index.
Instead, most experts recommend that you also diversify your investments across different asset classes and different geographical areas. Then you won’t be too badly affected if one business fails.
Platforms where you can invest in the NASDAQ and the S&P 500
These trading apps allow you to invest in companies within the indexes directly or to invest in funds/ETFs.
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Index funds
What is the best index fund?
The best NASDAQ or S&P 500 index fund will depend on your circumstances. Some workplace pension schemes limit the amount of funds you can choose from so you will need to select the closest you can find to your needs. Other funds offer different fund fees or transaction costs and have slightly different selection criteria.
Here are some of the best performing S&P 500 and NASDAQ funds according to JustETF:
| Icon | Fund | 5-year performance | 1-year performance (to February 2023) | Link to invest |
|---|---|---|---|---|
 | Vanguard S&P 500 (VUSA) | 86.77% | 6.64% | Invest with FreetradeCapital at risk |
 | iShares Core S&P 500 (CSP1) | 88.47% | 7.10% | Invest with eToroCapital at risk |
 | Invesco S&P 500 (SPXP) | 88.91% | 6.78% | Invest with IGCapital at risk |
 | HSBC S&P 500 (HSPX) | 87.01% | 6.99% | Invest with IGCapital at risk |
 | SPDR S&P 500 ETF (SPY) | 86.50% | 6.59% | Invest with IGCapital at risk |
 | Xtrackers S&P 500 Swap (XSPX) | 88.90% | 6.74% | Invest with IGCapital at risk |
| Icon | Fund | 5-year performance | 1-year performance (to February 2023) | Link to invest |
|---|---|---|---|---|
| iShares NASDAQ 100 (CNX1) | 117.03% | -1.18% | Invest with eToroCapital at risk |
| Invesco NASDAQ 100 (EQSG) | 117.26 | -1.21% | Invest with IGCapital at risk |
 | Amundi NASDAQ 100 (ANXG) | 120.38% | -1.07% | Invest with IGCapital at risk |
 | Lyxor NASDAQ 100 ETF (NASL) | 118.05% | -1.06% | Invest with IGCapital at risk |
| Xtrackers NASDAQ 100 (XNAQ) | N/A | -0.13% | Invest with IGCapital at risk |
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Is it better to invest in the S&P 500 or the NASDAQ?
Finder expert Zoe Stabler answers
Whether the NASDAQ or S&P 500 is best for you will depend on your circumstances and the other funds and assets in your portfolio.
If you want more exposure to potential growth stocks then the NASDAQ index might be a good choice with its emphasis on tech stocks. If you prefer a more general US index fund then the S&P might be right for you as you’ll be invested in 500 of the biggest companies in the US.
What are the top holdings in the S&P 500 and NASDAQ?
| S&P 500 | NASDAQ | ||||
|---|---|---|---|---|---|
 | Apple | | Apple | ||
 | Microsoft | | Microsoft | ||
 | Amazon | | Amazon | ||
 | Facebook inc A |  | Tesla | ||
 | Alphabet Inc A (Google) |  | Nvidia |
How to invest in the S&P 500 and NASDAQ
- Find an S&P 500 or NASDAQ ETF, index fund or mutual fund. Some index funds track the performance of all stocks on the index, whereas others only track a certain number of stocks or are weighted more towards specific stocks. You should select the fund that best suits your investment goals.
- Open a share-trading account. In order to invest in the funds, you’ll need to open a trading account with a broker or platform. Keep in mind that some index funds may only be available on certain brokerages or platforms. The providers in our comparison table below let you invest in US shares. We’ve listed some index funds below that are listed on the London Stock Exchange (LSE).
- Deposit funds. You’ll need to deposit funds into your account to begin trading. Some brokers may charge you deposit fees, or you may need to pay a forex fee in order for your pounds to be converted into US dollars.
- Buy the index fund. Once your money has been deposited, you can then buy the index fund. You’ll generally pay a small annual fee to invest in an ETF or index fund.
Best trading platform for index funds: Saxo
We chose Saxo as our top pick because:- Invest in over 19,000 stocks, funds and investment trusts.
- Use its award-winning trading platforms.
- Customer support is available 24 hours a day.
Need to know: Opening a Saxo share dealing account requires a high minimum investment (£500).
Read our review of Saxo.
Compare S&P 500 and NASDAQ trading platforms
Table: sorted by promoted deals first
These trading apps allow you to invest in companies within the indexes directly or to invest in funds/ETFs.
Bottom line
When comparing the NASDAQ and S&P 500 indices, it’s important to remember that there’s a big overlap. If you want to be invested in the biggest US companies, then you might want to choose the S&P 500. In contrast, if you want to invest in up and coming tech companies then you might plump for the tech heavy NASDAQ Composite index.
Frequently asked questions
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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