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Dow 30, Nasdaq 100 and S&P 500 – Gateway to investing in US stock market

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Buying US stocks helps to diversify portfolio globally. Geographical diversification is necessary because not all global economies move in tandem and exhibit varying growth potential over the long term. The US economy remains the biggest growth driver across the globe and with the changing dynamics, the American economy is expected to be first off the block once the current roadblocks around inflation, interest rates, and the Ukraine-Russia war eases out.

If you are looking to invest in the US stock market, the three leading stock market indexes can be a good starting point to zero-in on the kind of stocks or sectors you want to hold in your international portfolio.

As of July 11, 200, Dow 30, Nasdaq 100 and S&P 500 are down by about 11 per cent, 12 per cent and 21 per cent respectively over the last one-year.

Let us look at the 3 US stock market indices, what sectors of the market they represent and their key constituents.

Dow 30 index
Dow Jones Industrial Average (DJI) or Dow 30 index represents the companies that are based only in the US. The index consists of top 30 blue-chip companies and is a barometer of the US economy, its businesses and the consumption trends in the country. Some of the prominent companies in the 30-stocks index are Boeing, Nike, Goldman Sachs, Walmart, Intel, 3M, UnitedHealth Group, Apple, Coca-Cola, McDonalds, Microsoft etc.

Nasdaq 100 index
Nasdaq 100 can be called the tech-index of the world. Minus the financial stocks, Nasdaq 100 is a large-cap growth index and includes 100 of the top U.S. and international companies based on market capitalization. Along with financial stocks, it makes up the Nasdaq Composite index which too is a highly tracked index in US markets.

Some of the world’s leading companies across major industry groups, Industrials, Consumer Goods, Health Care, Consumer Services, Telecommunications, Utilities and Technology have their stocks listed on Nasdaq 100.

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. Some of the top US stocks by weightage in the Nasdaq 100 are Microsoft, Apple, Amazon, Alphabet (Google), Meta (Facebook), Intel, Cisco Systems, Comcast and Pepsico, Tesla, Nvidia, Adobe and Paypal.

S&P 500 index
The top-most single indicator of large-cap US stocks is none other than S&P 500 with stocks of nearly 500 leading corporations across about 11 sectors and covers about 80 per cent of the market capitalization of US stock exchanges. The top three sectors in the S&P 500 are Information Technology, Health Care and Communication Services totaling about 50 per cent of the index.

In addition to some of the top blue technology stocks as listed on Nasdaq, Johnson & Johnson, Berkshire Hathaway, Visa Inc, JP Morgan Chase forms the formidable list of stocks in S&P 500. While Nasdaq 100 and S&P 500 differ in terms of constituent stocks, holding stocks across both of these two leading indices gives an edge to an investor over the long term.

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