Nasdaq 100 index is a large-cap growth index and includes 100 of the top domestic and international non-financial companies based on market capitalization.
ICICI Prudential Mutual Fund has launched ICICI Prudential NASDAQ 100 Index Fund, an open-ended index fund replicating the NASDAQ-100 index. The fund gives Indian mutual fund investors an opportunity to diversify their domestic portfolio across the US stocks. Nasdaq 100 index is a large-cap growth index and includes 100 of the top domestic and international non-financial companies based on market capitalization. Some of the top US stocks included in the Nasdaq 100 are Facebook, Apple, Amazon, Google and Netflix – popularly referred to as the FAANG stocks.
NASDAQ 100 Index Fund, the NFO of which closes on October 11, 2021 aims to track returns of the NASDAQ-100 Index, subject to tracking error. The minimum investment required during NFO is Rs. 1000. Although the Nasdaq 100 is currently trading (14472) at near its all-time high level (15701), the exposure to the fund suits those who wish to diversify abroad with a long term perspective. In 2020, Nasdaq 100 was up by 47 per cent while YTD in 2021, the index is up by nearly 12 per cent.
The Nasdaq 100 consists of companies across major industry groups, Industrials, Consumer Goods, Health Care, Consumer Services, Telecommunications, Utilities and Technology Noticeably, what it does not include are the stocks of banks and financial companies, including investment companies. The maximum allocation of nearly 55.22 per cent is in the Technology sector while Consumer Services has a weightage of nearly 24.34 per cent.
As an Indian consumer of products and services of these firms, you can even invest in the growth story of these global blue-chip companies. The NASDAQ 100 Index Fund is suitable for investors looking for geographical diversification in their equity allocation in Index Funds. By investing in the fund, investors can get access to globally leading companies that maintain dominant positions in the market.
Markets around the globe perform differently each year, thus diversification to international markets may enable investors to earn better returns. Not only is the US a developed country with mature markets and the highest share in global equity markets (59%), the US is also a market that provides investors with an opportunity to invest in themes such as cloud computing, e-commerce, artificial intelligence etc. which is not much available in the domestic markets.
Investing solely in one economy keeps them exposed to country-risk. There are several micro and macro economic Geo-political factors that impact a nation’s economy. In case of any internal economic and political conflicts within the country, the portfolio remains exposed to the concentrated risk. In order to minimize risk and maximize the potential of returns, you need to diversify your investment portfolio. Diversification across asset-class, market capitalization etc is incomplete unless you diversify geographically.