Over any 20 year period, the NASDAQ-100 outperforms the S&P 500. If you DCA, that period is significantly shorter. So, why is S&P more commonly suggested than the NASDAQ?
Decreased Volatility Argument - The S&P is Less Volatile
Ok, who cares? If you’re 20+ years from retirement (which I think most people on this sub and Reddit are), volatility, AKA “higher risk”, is irrelevant. People act like risk is the same for everyone even though it’s proportional to time. Less time in the market = more risk in volatile stocks. Once you’re 20 years out from retirement, then you can start worrying about crashes.
Greater Exposure Argument - The NASDAQ Only Covers Tech
Ok, also who cares? The tech industry isn’t too big to fail, but if it does, we’ve got way bigger problems than our stock portfolios.
Other Arguments:
“If you’re just going off of greatest returns over 20 years, why not just invest in a single stock like Tesla or Nvidia?”
Because the likelihood of a single company (and while we’re at it, any cryptocurrency) failing seems disproportionately more likely than the greater tech industry failing. If you bought Cisco in January 2000, you’re still negative (without DCA). Additionally, the NASDAQ-100 is adaptive and changing; loser companies get booted off, which is a luxury individual companies (and cryptos) can’t provide me with.
“Past performance isn’t an indication of future performance.”
No, it’s not, and this is the only argument I see any validity in. Theres no guarantee that the tech industry will continue to boom as it has done in the past 40 years, but even if its growth begins to slow down, it’s certainly reasonable to believe that it would at the very least keep up with the S&P 500. In which case, one might as well bet on the NASDAQ in the event that it continues to provide better returns.
Someone please make this make sense: for someone 18 years old, why would they even touch the S&P 500 until at least 45 if the NASDAQ 100 exists?