This article explains public financial information. It does not recommend buying, selling or holding any investment.
The difference in one minute
The S&P 500 is designed to measure the performance of leading large-cap companies across the United States. The Nasdaq-100 tracks 100 of the largest non-financial companies listed on the Nasdaq Stock Market. That single distinction changes what each index owns and how it behaves.
Both are widely followed, market-capitalization-based benchmarks. But they are not interchangeable. The S&P 500 covers a broader range of industries, while the Nasdaq-100 has historically carried heavier exposure to technology and other growth-oriented businesses.
Which companies can enter each index?
S&P Dow Jones Indices applies published eligibility rules covering factors such as U.S. domicile, market capitalization, public float, liquidity and financial viability. An index committee reviews eligible companies, so inclusion is not determined by company size alone.
Nasdaq applies a rules-based methodology to securities listed on its exchange. Financial companies are excluded from the Nasdaq-100, while eligible technology, consumer, healthcare, industrial and other non-financial businesses may qualify. The index is reviewed and reconstituted under its published schedule.
How weighting changes the result
In a capitalization-weighted index, companies with larger market values generally receive larger weights. This means a small group of very large businesses can have an outsized effect on an index even when most constituents move differently.
Both benchmarks use adjustments and concentration controls described in their methodologies. The exact rules differ. Investors comparing products should therefore look beyond the number of constituents and examine the latest top holdings and sector weights published by the index or fund provider.
Diversification and sector concentration
The S&P 500 includes financial companies and is spread across all major sectors, although its composition changes with the size of the U.S. market. The Nasdaq-100 excludes financials and can become more concentrated in technology and communications-related companies.
Concentration is neither automatically good nor bad. It simply changes the sources of risk and return. A technology-led rally may help the Nasdaq-100 more, while a period led by banks, energy or other sectors may produce a different relative outcome.
Why their performance can diverge
Growth expectations, interest rates, sector earnings and the valuations of the largest constituents can create meaningful gaps between the indices. Companies whose value depends heavily on profits expected far in the future may be especially sensitive to changes in discount rates.
Past outperformance does not establish which index will lead next. A comparison should use the same currency, time period, dividend treatment and data source. Price-return and total-return versions of an index can also show different results because total return includes reinvested distributions.
The index is not the investment product
An index is a measurement methodology, not an account you can buy directly. Funds and exchange-traded funds seek to track an index, and each product can differ in fees, trading costs, tax treatment, currency exposure, replication method and tracking difference.
Before choosing any product, read its prospectus and current factsheet. Confirm the exact benchmark, expense ratio, risks and whether the product suits your objectives and jurisdiction. This article explains the benchmarks; it does not recommend either one.
Frequently asked questions
Is the Nasdaq-100 the same as the Nasdaq Composite?
No. The Nasdaq-100 contains 100 of the largest eligible non-financial Nasdaq-listed companies. The Nasdaq Composite is much broader and includes thousands of Nasdaq-listed securities.
Does the S&P 500 contain exactly 500 stocks?
It represents roughly 500 leading companies, but the number of securities can be slightly higher because some companies have more than one share class in the index.
Which index is more diversified?
The S&P 500 generally spans a broader sector set and more companies. Actual diversification still depends on current constituent weights, sector concentration and the product used to track the index.
Can an investor buy an index directly?
No. Investors typically use a fund or ETF designed to track an index. That product has its own fees, risks and tracking results.
Official sources
Definitions and methodology were checked against these primary resources. Consult the current documents for complete details.
Investor.gov — Market Indices (includes the S&P 500) ↗Nasdaq — Official Nasdaq-100 overview ↗Investor.gov — Index Funds ↗