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Interested in investing and heard of the Nasdaq? You’re in the right place. This article unpacks the Nasdaq: a key player in the stock market world. We’ll delve into how you can put your money to work in the Nasdaq, the types of companies listed on this exchange and even touch on the implications of currency risk for UK investors.
What is the Nasdaq?
The Nasdaq is an American stock exchange based in New York City. It’s the second-largest stock exchange in the world after the one that shares its home city, the New York Stock Exchange. Nasdaq was initially an acronym for the National Association of Securities Dealers Automated Quotations. Catchy, we know. The Nasdaq is very technology-heavy, being the home to all of the FAANG stocks, which comprise the world’s best-known tech firms (Apple and Facebook, for example).
Can I invest in Nasdaq from the UK?
Yes, you can invest in Nasdaq from the UK in several ways. These days, many share-trading platforms and brokers offer access to US stock markets. You can buy individual stocks listed on Nasdaq or invest in index or tracker funds that mirror the performance of the Nasdaq stock market, for example.
Why should you invest in the Nasdaq?
According to the Nasdaq website, the exchange is “widely considered to be the exchange of choice for innovative companies in technology”, plus other sectors that play a big role in driving US economic growth.
So, if you want to invest in innovative firms with the potential for higher returns, the Nasdaq is worth a look. For UK investors, putting money into US companies as well as UK investments is also a way of diversifying your investment portfolio – an approach that can help manage risk by spreading assets across multiple markets.
Ways to invest in the Nasdaq
There are 2 main ways to invest in the Nasdaq:
- Buy stocks and shares directly in firms listed on the Nasdaq. For example, you could pick a selection of firms in the Nasdaq and buy shares in each, though this would only replicate part of the full Nasdaq. You could also consider buying shares in all 100(ish) companies in the Nasdaq-100 index – the Nasdaq’s equivalent of the UK’s FTSE 100.
- Find a Nasdaq ETF (exchange-traded fund), index fund or mutual fund. The effort (and potentially high trading costs) of buying shares in multiple individual companies and updating your investments as companies move in and out of the Nasdaq may seem a bit daunting. If so, a fund that tracks the performance of Nasdaq companies might be a better bet. Some index funds track the performance of all Nasdaq stocks, whereas others only track a certain number of stocks (those in the Nasdaq-100, for example) or are weighted more towards specific stocks. You should select the fund that best suits your investment goals.
How to invest in the Nasdaq
- Open an investment account. To invest in Nasdaq shares or funds, you’ll need to open a trading account with a broker or platform that deals in US companies. Some index funds may only be available on certain brokerages or platforms. The providers in our comparison table let you invest in US shares.
- 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 for your pounds to be converted into US dollars.
- Buy shares or funds. Once your money has been deposited, you can then buy Nasdaq shares or invest in a fund. You’ll generally pay a small annual fee to invest in an ETF or index fund.
Which stocks are on the Nasdaq?
More than 3,500 stocks are available on the Nasdaq, including many of the largest companies in the world by market capitalisation.
Popular Nasdaq stocks include:
How much does it cost to buy and sell Nasdaq shares?
Some brokers or trading platforms will charge you a commission on every trade, while others may only charge you a foreign exchange fee when you initially deposit pounds and then charge no commission on trades.
It’s important that you understand the fee structure of each platform before using it to trade. Certain brokers or platforms will suit different types of investors but may be expensive if you only invest small amounts.
Below is a breakdown of the basic fees you’ll pay when making a single Nasdaq trade using each broker, as well as the foreign exchange fees involved.
|Fee for a US trade
|Foreign exchange fee
Other ways to invest in Nasdaq from the UK
If you want to invest in Nasdaq but don’t want to buy Nasdaq stock directly, you have other options. For example, you can buy an ETF that tracks the performance of the entire Nasdaq index, as well as indices such as the S&P 500 or Dow Jones Industrial Average.
Nasdaq ETFs and tracker funds
Dozens of ETFs and index tracker funds give you exposure to certain Nasdaq stocks. Many of these can be bought from the UK. Most popular UK trading platforms and brokers will offer at least one Nasdaq index tracker fund. Some of the most popular Nasdaq tracker funds include:
- First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)
- Invesco DWA NASDAQ Momentum ETF (DWAQ)
- PowerShares QQQ (QQQ)
- EQQQ Nasdaq-100 UCITS ETF Dist
- ProShares Equities for Rising Rates ETF (EQRR)
- Fidelity Nasdaq Composite Index Tracking Stock ETF (ONEQ)
- iShares NASDAQ 100 UCITS ETF
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 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.
What are the 1-, 3- and 5-year returns on the Nasdaq?
To give you an idea of potential returns of investing in the Nasdaq, below we’ve shown the 1-, 3- and 5-year price returns of the Nasdaq Composite index, starting from 2016. Price returns are directly linked to the index value.
Overall, bar a relatively small downturn in 2018, the Nasdaq has performed strongly. In 2022, the Nasdaq Composite was down from 14,512 to 10,466.48.
This shows the importance of investing for the long term and not panic-selling when the value of investments drops. While the Nasdaq may take a while to recover, history tells us that most stock markets bounce back from downturns eventually. After all, even after a substantial drop, the August 2023 value of the Nasdaq is still substantially higher than it was 5 years previously.
*At the end of the year
What are the Nasdaq Composite and Nasdaq-100?
The Nasdaq Composite (COMP) is a stock market index that tracks the common stocks and securities on the Nasdaq. The Nasdaq-100 index tracks a subset of the top 100 non-financial stocks on the Nasdaq. You can invest in these indices by buying an ETF that specifically tracks the performance of the stocks in the index.
Compare Nasdaq share trading platforms
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.
The Nasdaq, home to some of the world’s largest tech stocks, is a compelling platform for investors. You can either pick individual stocks listed on this exchange or invest in ETFs or funds that mimic its overall performance. Before diving in, choose a broker that supports trading US stocks, and remember to account for any additional currency exchange fees.
There’s no denying that the Nasdaq has a heavy tech focus, with close to 60% of its holdings hailing from this sector. Conversely, the S&P 500 – an index tracking 500 large US companies – offers a broader sector mix, leading in technology (28%), healthcare (13%) and financials (12%). Consider your sector preference when choosing an index, and remember that diversification is the key to minimising risk.
For UK-based investors, investing in the US-based Nasdaq means dealing with currency risk. Essentially, currency fluctuations could impact your investment’s value in pounds. ‘Hedged’ funds can help mitigate this risk, acting like a financial cushion to absorb the shock of currency movements.
And yes, the Nasdaq does pay dividends, with an average yield of 1.74%. So, if you want to feel like a Silicon Valley big shot and collect some (fairly modest) passive income along the way, investing in the Nasdaq could be for you!
Frequently asked questions
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