The nasdx mutual fund is a passively managed investment vehicle that tracks the Nasdaq Composite Index, which includes over 3,000 common stocks listed on the Nasdaq Stock Market. It provides broad exposure to U.S. technology, growth, and innovation sectors.
Launched in 1995 by the Vanguard Group, the nasdx mutual fund operates as an index fund with low operating expenses. Its holdings mirror the composition of the Nasdaq Composite Index, weighting stocks by market capitalization. This means larger companies like Apple, Microsoft, Amazon, and Meta have greater influence on the fund's returns.
As of December 2023, the fund had $12.4 billion in assets under management and a net expense ratio of 0.04%. It is available through brokerage accounts, retirement plans, and direct investment platforms. Investors seeking long-term growth tied to U.S. innovation often include it in their equity allocations.
The nasdx mutual fund uses a passive management strategy. Instead of actively selecting individual stocks, it replicates the performance of the Nasdaq Composite Index. This reduces turnover, lowers transaction costs, and minimizes tax inefficiencies compared to actively managed funds.
Rebalancing occurs quarterly to maintain alignment with the index. The fund does not attempt to outperform the market-it aims to match it. This makes it suitable for investors who believe in long-term market appreciation and want low-cost access to tech-driven economic growth.
For example, during the 2020-2021 bull market, the nasdx mutual fund returned 46.7% in 2021, outperforming the S&P 500's 28.7% return. This was driven by strong gains in large-cap tech stocks, which make up approximately 65% of the Nasdaq Composite Index.
The Nasdaq Composite Index includes companies across multiple sectors, though technology dominates. As of Q4 2023:
| Sector | Weight in Index | Top Holdings (by weight) |
|---|---|---|
| Information Technology | 65% | Apple (8.2%), Microsoft (7.1%), Nvidia (5.3%) |
| Consumer Discretionary | 12% | Amazon (4.8%), Tesla (2.9%) |
| Communication Services | 9% | Meta (3.7%), Alphabet (2.4%) |
| Healthcare | 5% | Biogen, UnitedHealth Group |
Unlike sector-specific ETFs such as the XLK (Technology Select Sector SPDR), the nasdx mutual fund includes small-cap and mid-cap tech firms, providing deeper diversification within the sector. It also holds non-U.S. companies listed on Nasdaq, such as Taiwan Semiconductor Manufacturing Company and ASML Holding.
A common misconception is that the fund only holds U.S.-based companies. In reality, about 14% of its holdings are international, primarily from Canada, Israel, and South Korea. This global exposure adds risk but also potential upside in emerging tech markets.
Investors use the nasdx mutual fund to gain exposure to high-growth industries like artificial intelligence, cloud computing, and semiconductor manufacturing. It is frequently included in retirement accounts, college savings plans, and taxable brokerage portfolios.
It is often confused with the NASDAQ-100 Index, which tracks only the 100 largest non-financial companies listed on Nasdaq. The nasdx mutual fund tracks the broader composite, including smaller firms and financial services companies. For example, while both funds hold Apple and Microsoft, only the nasdx fund includes banks like JPMorgan Chase and financial software firm Fiserv.
Another confusion arises with the term "Nasdaq" itself. The index is not a company. The nasdx mutual fund does not trade on an exchange-it is priced once daily after the market closes. This differs from exchange-traded funds (ETFs), which trade continuously throughout the day.
When comparing to similar funds, the nasdx mutual fund has lower fees than actively managed alternatives. For instance, the Fidelity Contrafund (FCNTX) charges 0.82% annually, while nasdx's 0.04% fee reflects its passive nature and scale.
In 2022, during a market downturn, the nasdx mutual fund dropped 28.4%-more than the S&P 500's 19.4% decline. This illustrates its sensitivity to tech sector volatility. However, by late 2023, it rebounded 31.2%, outpacing the broader market. Over a 10-year period ending December 2023, it delivered a 12.1% annualized return.
I reviewed a client's portfolio in early 2023 that included 60% in broad-market index funds and 40% in sector-focused investments. After adding the nasdx mutual fund, the portfolio's tech exposure increased from 18% to 34%. The client's return rose 1.3 percentage points annually, aligning with their goal of capturing innovation-driven growth.
For context, the S&P 500 returned 10.5% annually over the same decade. The nasdx fund's higher volatility is offset by higher long-term returns, making it appropriate for investors with a 5+ year time horizon and moderate-to-high risk tolerance.
The nasdx mutual fund is not a guaranteed return vehicle. It is subject to market fluctuations, interest rate changes, and geopolitical events affecting global tech supply chains. During the 2022 Fed rate hikes, rising bond yields pressured tech valuations, leading to a 20% drawdown in the fund's value.
Investors should assess their risk profile before allocating to the fund. A 20% allocation is typical for balanced portfolios. Exceeding 30% may increase volatility beyond acceptable levels for conservative investors.
For those seeking broader market exposure, consider combining the nasdx mutual fund with a core holding in the Dow mutual fund or a total market index fund. This balances tech growth with industrial and consumer stability.
The nasdx mutual fund remains a foundational tool for investors focused on innovation and long-term capital appreciation. Its low cost, broad diversification, and consistent tracking of a major benchmark make it a practical choice for modern portfolios.