How to invest in NASDAQ Composite index funds in 2024

By:

Prash Raval

Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.

Updated: May 12, 2023

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It only takes a few minutes to invest in the NASDAQ Composite index. One of the simplest and most popular ways to invest is to buy shares in a Vanguard NASDAQ Composite ETF through an online trading platform.

Where can I invest in the NASDAQ Composite index?

According to our expert research, eToro is the best ETF broker to invest in NASDAQ Composite index funds. 

Both NASDAQ Composite ETFs and NASDAQ Composite CFDs are available to invest in through eToro .

Here are three more places to buy the NASDAQ Composite, ranked according to their cost, security, and features.

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How do I invest in the IXIC index?

The easiest way is to sign up to a stock broker, open an investment account, and buy shares in a NASDAQ Composite ETF or CFD. This guide explains how to do it:

Step 1. Sign up to eToro

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We recommend using eToro to invest in NASDAQ Composite. Sign up for a brokerage account and deposit some money. You may need to supply a form of photo ID to verify the account.

Most Popular

1

Min. Deposit

$ 10

Best offer

User Score

10

Up to $240 bonus!

Deposit with ACA, Wire, Pay with my bank

Invest for dividends and get payout on stocks on Ex-Dividend day

Start Trading more info

Payment Methods:

Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer

Full Regulations:

CySEC, FCA

77% of retail CFD accounts lose money.

Step 2. Decide how to buy NASDAQ Composite

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This boils down to choosing between an NASDAQ Composite ETF or CFD. ETFs are generally better suited to investors who want to passively track the NASDAQ Composite’s performance. CFDs offer a greater range of trading options: you can use leverage, short the index, or buy and sell it outside of trading hours.

Step 3. Invest in the NASDAQ Composite

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Sign into your trading account and search for the NASDAQ Composite. Hit the ‘buy’ button and enter the details of your purchase, such as how much you want to spend. Hit ‘buy’ again to execute the trade.

Step 4. Monitor your investment

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When you buy a CFD, the trade goes through more or less instantly, and you’ll be able to see your new open position in your trading account. ETF purchases can take longer, and if you buy outside of traditional trading hours it won’t go through until the next morning.

Your trading account will show the price change in the NASDAQ Composite since you bought it, so you can see your profit/loss at a glance. Use that information, along with your own research, to decide when to sell the NASDAQ Composite and close your position, ideally at a profit!

The different ways to invest in the IXIC

As we mentioned above, there are numerous ways to put your money into the NASDAQ Composite. ETFs and CFDs are the simplest options for beginners, but there are alternatives. Here’s a brief overview of each option and who it’s best suited for.

NASDAQ Composite ETFs

An ETF (exchange-traded fund) is an investment fund traded on a stock exchange, much like a stock. Exchange traded funds can hold different assets, such as individual stocks, bonds, or commodities, or serve as a proxy for a stock market index.

An NASDAQ Composite ETF is one way of investing in the NASDAQ Composite. It’s simply an investment fund that mirrors the performance of the NASDAQ Composite. When you buy shares in the fund, the value of your investment will rise or fall with the NASDAQ Composite itself. 

ETFs are ideal for new investors because they have a very low minimum investment. You can start with a few pounds and get exposure to some of the world’s largest companies. They’re also practical if you plan on trading the NASDAQ Composite index, because you can buy or sell shares in the fund throughout the day.

Examples of popular IXIC ETFs

• Invesco QQQ Trust (QQQ)
• ProShares UltraPro QQQ (TQQQ)
• iShares NASDAQ 100 ETF (ONEQ)

NASDAQ Composite index funds

An index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the NASDAQ Composite. It’s very similar to an ETF, in that there are low management fees and you can buy shares through your online broker.

However, there are a couple of differences. NASDAQ Composite index funds are only priced at the end of each trading day, so you can buy or sell shares in the fund once per day. There may also be a higher barrier to entry, through a much larger minimum investment when you invest in NASDAQ Composite index funds.

That means an NASDAQ Composite mutual fund is better suited for long term investors with a higher initial budget, where the infrequent trading and barriers to entry are far less of an issue.

Examples of popular IXIC index funds/mutual funds

• Fidelity Nasdaq Composite Index Fund (FNCMX)
• T. Rowe Price Nasdaq 100 Index Fund (PRPIX)
• Vanguard Information Technology Index Fund (VITAX)

NASDAQ Composite CFDs

CFDs (contracts for difference) are a way to speculate on NASDAQ Composite price changes with more flexibility than if you use an ETF or index fund. A CFD is a ‘derivative’, which means it gets its value from the underlying asset – in this case the NASDAQ Composite – but it’s separate from it.

As a result, CFDs can be leveraged, where you borrow money to multiply the size of the trade, or they can be used to go ‘short’, where you place a trade on the index to fall in value. You can also buy and sell them outside of regular trading hours.

All of this means NASDAQ Composite CFDs offer the potential to outperform a fund that passively tracks the NASDAQ Composite’s performance. Of course, you can also underperform it as well. Tools like leverage and shorting introduce a lot more risk, and are best left to experienced traders.

NASDAQ Composite futures

Futures contracts are agreements to buy or sell the IXIC at an agreed price on a set date in the future. NASDAQ Composite futures are a means to predict how you think the index is going to perform over a set time frame, such as the next three or six months.

Most futures contracts involve leverage, so you only put up a small part of the total trade value (the margin) when you buy one. That makes futures more risky, and they require a bit more financial expertise to understand as well.

Some traders use futures as a hedge against the performance of stocks they own. For instance, if you own stocks that are part of the NASDAQ Composite then you might want to short the NASDAQ Composite so that you still make some money if the price falls.

NASDAQ Composite stocks

Another way to invest in the NASDAQ Composite is to buy shares in the individual stocks that the index tracks. It isn’t practical to buy every share in the index, but you can invest directly into a few of the most heavily weighted stocks in the NASDAQ Composite in order to get broad exposure to its performance.

The most heavily weighted stocks in the NASDAQ Composite tend to be the largest companies by market capitalisation. If you invest directly in those largest stocks, you gain exposure to the index without taking on the risk of all the underlying companies.

One reason to do this is that these larger companies with the highest market cap dominate the index anyway, so that it can give you the impression of a diversified portfolio while actually being reliant on the performance of those particular stocks.

For the NASDAQ Composite index, the largest stocks you might choose to invest in are:

The flip side of investing directly like this is that you lose the diversification and stability that comes with buying into an entire index. It requires much more hands-on management to do your own stock picking, so it’s best suited to more experienced investors.

How much does it cost to invest in the NASDAQ Composite index?

From $0 to $5, depending on how you invest. For each option, you must consider the cost of buying the actual asset, whether that’s an ETF, index fund, CFD, or share, plus the fees associated with it.

*A fee comparison of 3 leading brokers for example purposes

ETFs and CFDs are generally the cheapest option overall, as they have low fees and a low minimum investment. Index funds and mutual funds have low fees but may have a high minimum investment. Buying individual stocks is the most expensive option in absolute terms, because the share price of a single large company is often more than $100.

All options are likely to include a trading fee, which you pay each time you make a transaction. Some trading platforms offer zero-fee trading, with others it may be a few dollars. 

Then ETFs and index funds each have their own expense ratio. Expense ratios refer to an annual management fee, charged as a percentage of your total investment. Expense ratios are usually no more than 0.05%, so if you invest $1,000, you would pay $5 per year in management fees.

Should I invest in the NASDAQ Composite index? 

Yes, NASDAQ Composite investing is a great choice if you’re looking for a safer investment with more price stability compared to picking individual stocks. It gives you an instantly diverse portfolio with exposure to a broad area of the stock market.

The flip side is that you have less control over which companies you invest in. An index committee decides how the index works, and you can’t pick and choose the underlying companies you like the most. The NASDAQ Composite is better suited to hands-off investors, compared to those who have the skills, experience, and desire to pick their own stocks.

What are the advantages of investing in the NASDAQ Composite index?

An index provides instant stock market diversification, where you spread your risk across a large number of underlying companies, rather than one or two. Here are some more reasons why you might want to invest in the NASDAQ Composite index:

• The NASDAQ provides exposure to the tech sector. The NASDAQ Composite is heavily weighted towards the technology sector, one of the fastest growing in recent years. Investing in the NASDAQ gives investors to companies that are innovation leaders and have the potential for significant growth. 
• It is a diverse index. The NASDAQ is made up of over 3,000 companies from various sectors. This provides investors with a diverse portfolio of stocks and can help reduce the risk of investing in a single company. 
• Many of the companies in the NASDAQ have a global reach. While the NASDAQ primarily focuses on the United States, many of its companies are globally recognised brands which operate in international markets. This means you’ll get exposure to the global economy. 
• It’s a highly liquid index. The NASDAQ Composite is one of the most liquid indexes, so there are rarely any issues with buying and selling shares. 
• It’s one of the top three stock indices in the US. The NASDAQ Composite Index (IXIC) is one of the three largest stock indices in the United States, alongside the S&P 500 and the Dow Jones Industrial Average. It consists of hundreds of stocks, focusing on technology and other stocks representing different growth industries.
• It focuses on high-growth stocks. The NASDAQ Composite Index features a collection of stocks that tend to be both higher growth and higher volatility than more traditional indexes such as the Dow Jones Industrial Average Index. It can be a good investment if you’re willing to accept more risk in exchange for a bigger potential reward. 

What are the disadvantages of investing in the NASDAQ Composite index?

The main risk of investing in the NASDAQ Composite is that all the underlying companies are related in some way, so a broader economic downturn that affected the entire country would likely affect many stocks in the index at the same time. Here are some more risks of NASDAQ Composite investing.

• There is potential for high volatility. The NASDAQ is known for its high volatility, which can result in large price swings in short periods. This can be a challenge for anyone wanting stable returns. 
• It is concentrated around the tech sector. The index is heavily weighted around the technology sector, which can lead to concentrated exposure. The overall index will likely drop if the tech sector suffers a downturn.
• It is weighted by market cap. The NASDAQ is weighted by market capitalisation, which means that large companies have a greater influence on the index than smaller companies. This can lead to bias towards the largest companies and limit the potential for smaller ones to deliver returns. 

NASDAQ Composite predictions from expert analysts

Insights from stock market analysts can give you an idea of the overall sentiment towards the NASDAQ Composite. It may help you see things from a different perspective, or pick up things you may have missed. Here are some NASDAQ Composite forecasts and insights from leading experts:

Short this Nasdaq and invite me to your funeral,”

Jim Cramer, CNBC

Ultimately, the degree of inflation moderation ahead, in turn Fed policy, and how much damage will be inflicted on the economy will remain the primary influences on earnings and multiples in our view.”

Raymond James Investment Bank

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