The NASDAQ 100 is often used as a proxy for growth stocks. (these top 100 stocks are ones which are fast paced and growing, faster than the average market).

A lot of companies and hedge fund managers who are looking for high growth look at the NASDAQ 100 as they look to diversify in the technology sector. Investing in a number of these companies that do different things ensure that the risk is spread.

So far this year, the NASDAQ 100 stock has increased by 46% compared to the S&P 500 19% jump this year.

The NASDAQ Rebalance

Usually a balance only happens every quarter but it’s been decided that a special rebalance will happen on Monday July 24th 2023. This happened because seven of the largest NASDAQ 100 companies’ stock has rallied hugely recently which has meant that over the 100 companies in the NASDAQ, these seven companies account for over 50% off all NASDAQ stocks. This created a big risk.

The rebalance will bring the magnificent seven stock(Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta Platforms.) down to 46% share of the NASDAQ 100 (still a large proportion but less than 50%). More weight will be given to some companies like Netflix and Adobe.

Note: The equity prices don’t simply go up and down due to the NASDAQ rebalance. There are also other factors, such as the federal interest rates and company earnings.

Will the NASDAQ rebalance affect individual security prices?

Markets will experience some volatility as the changes become known and the market repositions. As investors we need to understand, know, and not be scared about these terms and what’s happening, so we can minimize our risk.

>> Suggested Activity

1. Go to Yahoo Finance.
2. Make a watch list on Yahoo Finance for companies you’re interested in.
3. Look at the company’s 6 month’s financials before putting any money in.

Recap on a Company’s Earnings
Visit the full blog here.
A company’s Earnings are its after-tax profit in a given quarter or fiscal year.

Why are Earnings Important?
Earnings are perhaps the single most important and most closely studied number in a company’s financial statements.
Earnings are the main determinant of a company’s share price because they can be used in only two ways:
They can be invested in the business to increase its future earnings
Or they can be used to reward stockholders with dividends.

What is Earnings Season?
Every 3 months all companies who trade on the US stock market report their earnings.
1st quarter - April
2nd quarter - July
3rd quarter - October
4th quarter - January

———————

Disclaimer for all content on this website:
- No client relationship is assumed by consuming this content
- All content is copyrighted under Invest4LifeMK
- All material is presented for educational purposes only
- No tax advice or financial advice should be solicited