The Nasdaq-100 is a major stock index that tracks the performance of 100 of the largest companies listed on the Nasdaq exchange. Nasdaq-100 is a market capitalization-weighted index, which means that the largest components are likely to outweigh the smaller ones. 

The index was launched in 1985 and is owned and operated by Nasdaq OMX, which is a division of Nasdaq Inc - the parent entity of the Nasdaq exchange. 

The Nasdaq-100 is a tech-focused index, as the entire Nasdaq exchange is home to hundreds of world-leading technology firms, such as Apple, Amazon.com, Alphabet, Microsoft, Meta Platforms, etc. 

The index currently holds 101 constituents, with the largest-weighted components being Microsoft and Apple each accounting for over 12.5% of the total market capitalization of the index. 

As to be expected, the Nasdaq-100 is tracked by a wide variety of index funds and ETFs - with the Invesco QQQ Trust (Nasdaq:QQQ) being one of the largest funds by market capitalization. 

The index is reconstituted annually, which means that the composition of the index can change over time as companies are added or removed based on their market capitalization and other factors. 

Often viewed as the primary benchmark of the United States stock market, the S&P 500 is a market capitalization-weighted index that tracks the performance of the 500 largest publicly traded companies listed on both the NYSE and Nasdaq. The S&P 500 is reconstituted on a quarterly basis to reflect the performance of its constituent companies. 

The index is home to 503 constituent companies and uses a float-adjusted capitalization-weighted method, which means that the weighting of the index takes into account the number of shares available for trading.

The index was launched in 1957 and is stalked by a wide range of index funds, such as the SPDR S&P 500 ETF Trust. Apple Inc (AAPL) is the largest constituent of the S&P 500 - accounting for 7.18% of total weight. 

The all-time price performance comparison of the Nasdaq-100 and the S&P 500 paints an interesting picture and highlights some of the key differences between the two indexes, as well as the underlying exchanges. 

Nasdaq is a tech-heavy exchange, which means that the Nasdaq-100 index performs particularly well during times of economic boom, as tech stocks attract the most amount of interest from the investing community. The S&P 500, on the other hand, is a more diverse index with a number of long-standing industrial corporations among its ranks. This difference becomes even more evident when viewed on the side-by-side comparison chart of the two indexes:

To better understand how each index works and when to track each of them, it is beneficial to look at some of the key differences and similarities between the Nasdaq-100 and the S&P 500. 

Similarities

• Focus on large-cap stocks - both the S&P 500 and the Nasdaq-100 are home to some of the largest publicly traded companies in the United States and the world. The S&P 500 boasts 503 constituents, while the Nasdaq-100 has 101 - all of them being large-cap stocks 
• Importance - the importance of the S&P 500 and the Nasdaq-100 cannot be understated, as combined with the Dow Jones Industrial Average they are the most closely-followed stock indexes in the world 
• Diversification - both indexes are diversified across over a hundred stocks, which makes them attractive options for investors who prefer broad exposure to the U.S stock market, as opposed to the concentrated risk of individual stocks 
• Market capitalization weighting - although the methodology is slightly different, both indexes are weighted by market capitalization, meaning that the largest constituents have more influence on the performance of the indexes 

Differences

• Composition - the S&P 500 is composed of 503 companies from a variety of sectors, while the Nasdaq 100 is heavily weighted toward technology stocks and consists of 101 companies
• Weighting method - while both indexes are weighted by market capitalization, the S&P 500 is a free-float adjusted index, meaning that it considers the number of shares available for trading 
• Performance - the Nasdaq-100 tends to outperform the S&P 500 during economic booms, as investors are more inclined to invest in high-growth technology stocks 
• Reconstitution - the S&P 500 is reconstituted on a quarterly basis, while the Nasdaq-100 is reconstituted annually, meaning that the composition of the indexes changes at different frequencies 

• The S&P 500 and Nasdaq-100 are two of the most closely-followed stock indexes in the world
• The S&P 500 tracks the performance of the 500 largest companies listed on the NYSE and Nasdaq, while the Nasdaq-100 tracks the 100 largest listed on the Nasdaq exchange
• The S&P 500 is a free float-adjusted, capitalization-weighted index and takes into account the number of shares available for trading, while the Nasdaq-100 does not
• Nasdaq-100 is a tech-focused index and performs better than the S&P 500 during economic boom cycles
• A wide number of index funds track the S&P 500 and the Nasdaq-100 to give investors broad exposure to the U.S. stock market