S&P 500 vs. Nasdaq: what actually differs between the two indices

Both indices are quoted in the same news segments, but they are not measuring the same thing. The S&P 500 tracks 500 large US companies spread across eleven sectors, weighted by market capitalization. The Nasdaq figure most people mean when they say "the Nasdaq" is either the Nasdaq Composite, which includes essentially every stock listed on the Nasdaq exchange, or the Nasdaq-100, a narrower index of the 100 largest non-financial Nasdaq companies, heavily weighted toward technology. The practical difference for an investor is concentration: the S&P 500 spreads risk across the whole economy, while the Nasdaq-100 concentrates it in a smaller set of growth and tech names, which has historically meant higher returns in strong markets and sharper drawdowns in weak ones.

Key takeaways

• The S&P 500 holds about 500 companies across all eleven GICS sectors; the Nasdaq-100 holds 100 non-financial companies and is roughly 60% technology by weight.
• The Nasdaq-100 has shown higher annualized volatility than the S&P 500 in most years over the past decade, according to Nasdaq's own index research.
• Drawdowns tell the same story: in the 2000-2002 dot-com crash the Nasdaq fell about 78%, versus roughly 49% for the S&P 500 over a comparable window; in 2022, the Nasdaq fell about 36% against the S&P 500's 25%.
• Neither index is better. The choice is a trade-off between diversification and concentrated growth exposure, and it should be sized relative to the rest of a portfolio, not treated as an either/or decision.
• An ETF tracking either index is a single, large equity position. How much of a portfolio it should occupy depends on the investor's other holdings, time horizon, and tolerance for drawdowns.

What each index actually measures

The S&P 500 is maintained by S&P Dow Jones Indices and includes 500 leading US companies selected to represent roughly 80% of available US market capitalization. It spans all eleven GICS sectors: information technology, financials, health care, consumer discretionary, communication services, industrials, consumer staples, energy, utilities, materials, and real estate. It is market-cap weighted, so larger companies move the index more, but no single sector is a prerequisite for inclusion.

The Nasdaq-100 is different by design. It includes the 100 largest non-financial companies listed on the Nasdaq exchange, rebalanced quarterly and reconstituted once a year. Financial companies, including banks, insurers, and REITs, are explicitly excluded from the index by rule. That single exclusion, combined with Nasdaq's history as the listing venue of choice for technology and software companies, is why the index skews so heavily toward one sector.

There is a third term worth separating out: the Nasdaq Composite. It includes nearly every common stock listed on the Nasdaq exchange, more than 3,000 companies, and is broader by count than the Nasdaq-100 but still concentrated in the same direction, since most Nasdaq-listed companies are technology or growth names. When people say "Nasdaq" in a headline, they usually mean the Composite; when they say "Nasdaq-100" or reference an ETF like QQQ, they mean the narrower index. This article focuses mainly on the Nasdaq-100, since it is the version most commonly compared against the S&P 500 in investment contexts.

Composition and sector concentration, side by side

The gap between the two indices is clearest in sector weights. Using tracking-fund holdings data as of early September 2026, technology alone accounts for roughly 38% of the S&P 500, compared with close to 60% of the Nasdaq-100. Add communication services and consumer discretionary, sectors that include several large technology-adjacent names, and the Nasdaq-100's top three sectors make up more than 80% of the index. The S&P 500's top three sectors make up closer to 60%.

The two indices also differ in mechanics beyond sector weight. The S&P 500 holds around 500 constituents across all eleven GICS sectors and rebalances quarterly. The Nasdaq-100 holds exactly 100 constituents, excludes financial-sector companies by rule, rebalances quarterly, and reconstitutes its membership once a year. Both use a market-cap-based weighting method, though the Nasdaq-100 applies a modified version that caps the influence of its largest names. Sector weights shift with quarterly rebalances and market movement, so the figures above are directional estimates rather than fixed numbers.

Concentration shows up again at the single-stock level. In 2026, the small group of mega-cap technology companies often called the "Magnificent Seven" has been reported by Forbes at more than 30% of total S&P 500 weight, a level high enough that several strategists have flagged it as a diversification concern even within a "diversified" 500-stock index. In the Nasdaq-100, the same group of companies typically represents an even larger share, since the index has a fifth of the constituent count and a similar tilt toward the same names. Understanding this kind of single-stock and single-sector concentration is part of what analyzing a stock before buying into an index fund actually involves. It's easy to assume an index fund is automatically diversified; the composition says otherwise once you look at where the weight sits.

Historical volatility and drawdowns

Concentration has a measurable cost in downturns and a measurable benefit in strong up markets. Nasdaq's own index research group has published year-by-year annualized volatility comparisons between the Nasdaq-100 (NDX) and the S&P 500 (SPX) going back to 2008, and in most of the years measured, NDX volatility ran higher than SPX, by as little as half a point in 2009 and by more than five points in 2018. The gap is not constant, and there were individual years where SPX volatility briefly exceeded NDX, but the general pattern held: a narrower, tech-heavy index moves more than a broad, all-sector one.

Drawdown history makes the same point more visibly. In the dot-com crash of 2000 to 2002, the S&P 500 fell roughly 49% over a broader multi-year decline, while the Nasdaq fell about 78% from a March 2000 peak to an October 2002 trough. In the global financial crisis of 2007 to 2009, the S&P 500 fell about 57% from October 2007 to March 2009, while the Nasdaq saw a deep decline over the same window, though less extreme than 2000-2002 in relative terms. The COVID crash of 2020 is the exception: the S&P 500 fell about 34% and the Nasdaq about 30%, both from February to March 2020. In the 2022 bear market, the S&P 500 fell about 25% from January to October 2022, while the Nasdaq fell about 36% from November 2021 to December 2022.

The 2020 COVID crash is a useful exception because both indices fell by a similar amount over the same few weeks, since that particular shock hit nearly every sector at once. In slower, valuation-driven downturns like 2000-2002 and 2022, when growth and technology stocks were repriced more sharply than the broader market, the Nasdaq's drawdown ran noticeably deeper than the S&P 500's. This is the portfolio risk side of the concentration trade-off: the same weighting that lifts the Nasdaq-100 in a technology-led rally tends to pull it down harder when that same sector corrects.

See it on your own timeframe. Averages and single-crisis comparisons only tell part of the story, because the right period to look at depends on when you'd actually be invested. WM Platform's Compare tool lets you put the S&P 500 and Nasdaq side by side, or any two indices, ETFs, or funds, over the exact same historical window, with matched return, volatility, lowest-return (drawdown), and Sharpe ratio figures calculated on identical dates. It's free to try and takes a couple of minutes to set up your own comparison.

Which type of investor tends to prefer which

This is a question of trade-offs, not a recommendation, and WM Platform doesn't make investment recommendations. But the underlying logic is straightforward enough to lay out.

An investor who wants a single position that already spans most of the US economy, with lower single-sector exposure and historically shallower drawdowns in valuation-driven corrections, tends to lean toward a broad index like the S&P 500. It still concentrates meaningfully in mega-cap technology, as the Magnificent Seven weight shows, but far less than the Nasdaq-100 does.

An investor who wants concentrated exposure to large-cap growth and technology, and who is comfortable that the same concentration can mean a deeper drawdown in a tech-led downturn, tends to lean toward the Nasdaq-100 or Nasdaq Composite. That investor is often already holding other, more defensive assets elsewhere in their allocation, precisely because the Nasdaq-100 on its own is not a balanced, all-sector holding.

Many investors end up holding both, in some proportion, alongside other asset classes. That's an asset allocation decision as much as an index-selection one: the question isn't only S&P 500 or Nasdaq, it's how much of the overall portfolio either exposure should represent, given everything else already held, including bonds, international equities, or other sectors underweighted by both US indices. The starting point for either index is a properly diversified portfolio, not a single ETF picked in isolation.

How an ETF on either index fits into a portfolio

In practice, few investors buy the S&P 500 or Nasdaq-100 directly. They buy an ETF that tracks one of them, commonly a fund tracking the S&P 500 or one tracking the Nasdaq-100. Either fund is, functionally, one large equity position with a specific sector tilt baked in. Adding an S&P 500 ETF to a portfolio that is already overweight technology stocks doesn't diversify away that tilt nearly as much as it might seem to, since technology already carries roughly 38% of the index's own weight. Adding a Nasdaq-100 ETF on top of individual technology holdings compounds the concentration further.

This is where reviewing the whole portfolio, not just the two index names, matters. A portfolio management approach that only checks whether you own an S&P 500 fund and a Nasdaq fund misses the actual question, which is how much combined technology and mega-cap growth exposure sits across every holding once both funds, and anything else in the account, are counted together. Tools that let you model a combined portfolio, rather than evaluating each fund in isolation, make that concentration visible before it becomes a problem in a downturn. WM Platform's Portfolio tool does this by aggregating real historical return, volatility, drawdown, and Sharpe ratio across an entire portfolio, not fund by fund.

Some investors also weigh index funds against actively managed alternatives for either exposure; that's a separate question covered in passive vs. active management, and it applies equally whether the underlying benchmark is the S&P 500 or the Nasdaq.

Want to compare these two indices yourself? Everything above is a snapshot as of one date. Markets move, sector weights shift after each rebalance, and the right comparison window depends on your own time horizon, not a fixed historical stretch. Create a free WM Platform account to run your own S&P 500 vs. Nasdaq comparison, or compare either one against your existing holdings, with full historical data on return, volatility, drawdown, and Sharpe ratio. Accounts also get a monthly performance email summarizing how tracked portfolios and watchlists have moved. Paid plans on Pricing add deeper historical ranges and portfolio-level analysis for investors managing more than a couple of positions.