Investing £5,000 in a Nasdaq 100 index fund 5 years ago would be worth a lot more now.

I Nasdaq 100Filled with America’s biggest and best tech stocks. While many investors track the S&P 500this growth index has actually been a very strong performer over the past five years. And luckily for UK investors, there are plenty of London-listed index trackers to choose from. In other words, British investors can easily cash in on the returns of US tech giants.

Nasdaq’s performance has been exemplary. But it is important to note that the journey is also difficult, especially in comparison with indicators such as FTSE 100 and even FTSE 250. Still, investors who weathered the storm made huge profits.

So how much would they have made if they had invested £5,000 in a low-cost index tracker back in December 2019?

Nasdaq’s five-year return

At the beginning of December 2019, the Nasdaq 100 sat at about 8,400 points. However, being home to some of the most volatile and cheap tech stocks, this quickly dropped to less than 7,000 within a few months of the pandemic taking hold worldwide.

While tech stocks recovered quickly, rising interest rates and inflation caused everything to fall again during the 2022 stock market correction. In fact, the Nasdaq 100 also fell 30% during this period. As mentioned before, it’s a flexible indicator.

However, even with all these fluctuations, the index now stands at just 21,000 points. That means investors have received an impressive 150% return over the past five years. This profit increases up to 160% when dividends are included.

By comparison, the S&P 500 has returned just shy of 110% over the same period. That means investors who put £5,000 into the Nasdaq 100 five years ago are now sitting on £13,000 compared to £10,500 brought in by the S&P 500.

What drives returns?

Nasdaq is a market-cap-weighted index. That means big companies have a big influence on its performance. And currently the five largest stocks are responsible for nearly 35% of the index’s return. The biggest among them an apple (NASDAQ:AAPL).

The consumer technology giant needs no introduction. On its own, the business outperformed its parent benchmark, generating a 252% return even before dividends.

With inflation cooling, analysts predict an increase in consumer electronics spending next year by calling for a new wave of mobile spending. Simply put, the company’s next The iPhone it could be set to fly off the shelves, especially with its advanced artificial intelligence (AI)-powered capabilities. And when paired with its booming services segment, including digital payments, this growth could be the tipping point in the long run.

However, the company is not without its faults. With strong reliance on the Chinese market, American business needs to stay in tune with the Chinese government. And that may be more difficult under a Trump presidency whose stance against China is no secret.

Apple isn’t the only company driving the Nasdaq 100’s profits. And there are plenty of others trading at high multiples with expectations for future growth. As such, the volatility index’s reputation is unlikely to change anytime soon.