S&P 500 or Nasdaq-100: Which Index Is Better?

When people say "the market", they usually mean one of these two indices. Index funds tracking each are among the most popular investments in the world, and choosing between them is a classic question on X.

What people on X are asking

A June 2026 explainer reminded readers that "When people say 'the market went up,' they usually mean an index, like the s&p 500 or nasdaq 100." Another post asked why the same few companies are always at the top and pointed out that buying an S&P 500 or Nasdaq index fund automatically spreads your money across the biggest companies by market value, so the giants keep getting more of it. And in November 2026 one investor argued that a thematic fund mostly overlaps with what an S&P 500 or Nasdaq fund already holds, at higher fees.

The fact-checked answer

What each holds. S&P Dow Jones Indices describes the S&P 500 as 500 leading US companies covering about 80% of available US market capitalization, across all sectors including banks and insurers. Nasdaq describes the Nasdaq-100 as the 100 largest non-financial companies listed on the Nasdaq Stock Market. Both weight companies by market value, so the largest companies have the biggest effect.

Performance, from FRED price data (no dividends).

The pattern is consistent: the Nasdaq-100 has delivered more upside in strong growth markets and more downside in sell-offs, such as 2022 when interest rates rose quickly. See the rebased chart on our statistics page.

Overlap. Most of the Nasdaq-100's largest companies are also among the S&P 500's largest. Owning both funds means doubling up on the same mega-caps more than adding diversification.

Costs. Index funds are typically low-cost, but expense ratios differ by fund. Investor.gov explains that an index fund aims to track an index and that fees reduce your return.

Decision helper

Checklist

1. Decide how large a fall you could hold through; the Nasdaq-100 lost a third in 2022.
2. Check how much the two funds overlap before buying both.
3. Compare expense ratios and tracking.
4. Look at total return, including dividends, not just price charts.
5. Invest over time if you are worried about timing.

Common mistakes

• Choosing based on the last five years only.
• Assuming the Nasdaq-100 is "the Nasdaq" (the Nasdaq Composite has thousands of stocks).
• Ignoring that both are heavily concentrated in the same giant companies.

FAQ

Which has performed better historically?

Over the last five years to November 2026, the Nasdaq-100 (+74.6% price) beat the S&P 500 (+56.5%), but with deeper drawdowns such as −33% in 2022.

Why does the Nasdaq-100 exclude banks?

By design it includes only non-financial companies listed on Nasdaq.

Is the S&P 500 diversified?

It holds about 500 companies across all sectors, but the largest few make up a big share of its value.

Do these numbers include dividends?

No. FRED's series are price indices. Total return would be higher.

Should I own both?

Many investors do, but the overlap is large, so the combination is mostly a tilt toward big tech.

What drives the gap between them?

Mainly sector mix: the Nasdaq-100 leans toward technology and communication companies that react more to growth and interest-rate expectations.