Why do people mostly suggest the s&p and not the Nasdaq?

[4point0]

So I’m in my mid 20s, and for someone who has time and is willing to take on short term risk for long term gains, wouldn’t the Nasdaq be a better index than the S&P 500? This is my strategy and it appears to be simple and right in front of everyone but no one suggests it.

Over the past 15 years the nasdaq has had a compounded annual growth of return of 16% vs the s&p 8%, yet the most common thing you hear is to index into the broader market
or just buy the s&p. It seems the more obvious choice would be the Nasdaq. I get the nasdaq is mostly tech and less diversified than the s&p, and that doesn’t mean you can’t buy both, but it seems it makes more sense in early years to buy more of the nadaq and less of the s&p

Am I missing something?

 

[nograffiti]

@4point0 “Past results are not indicative of future returns”.

It took the nasdaq 15 years to recover from the dot com bubble (peak in 2000 and finally recovered losses in 2015).

I don’t think it’s a bad index, I just prefer more broad exposure at the cost of lower, more stable, gains.

To each their own though! Your time horizon, assuming you’re investing for retirement, is long enough that most likely you would be fine.

 

[nonehere]

@nograffiti Agree, QQQ is much more volatile. QQQ Dropped 2.3% today, in one day. Because Tesla and Netflix had bad days.

S&P 500 was only down 0.66% today.

Having some QQQ is a good thing, having solely QQQ probably isn't.

 

[menorah]

@4point0 Probably because it dropped 80% during the dot com crash and took 10+ years to recover.

S&P is diversified over a variety of sectors where as QQQ is concentrated on tech. If you have a long enough timeline or can stomach a huge drop nothing wrong with it.

 

[cherylkiwi]

@4point0 I do both. VOO and QQQ. When I was in my 20’s I would stress too much of the ups and downs. It’s common to do that at a young age because you typically do not have a very high net worth yet. Be disciplined and just keep investing and don’t let the ups and downs get to you. I’m now 39 and much more disciplined. Buy and hold never sell , only buy into companies you believe in for at least 5+ years .. Index funds are great because you shouldn’t have to worry about selling even in a down market.

 

[neoinarien]

@4point0 Personally I favor VTI or VT over VOO as they are considerably more diverse. QQQ is way too concentrated for me.

Basing investment choice on the last 10 or 15 years' performance is like driving by looking in your rear view mirror.

 

[bruisedheel]

@neoinarien Yes and no. Backtesting is a crucial part of developing models, both financial and otherwise