The best-performing index of all time, in terms of historical total returns (capital appreciation plus dividends), is generally considered to be the NASDAQ-100 Index.

This is largely due to the growth of technology stocks and their increasing dominance in the global economy. It has consistently outpaced other major indices in terms of total returns, especially during periods of technological innovation and market optimism.

Why the NASDAQ-100 is the Best Performing:

Heavy Tech Exposure: The NASDAQ-100 includes 100 of the largest non-financial companies listed on the NASDAQ exchange, with a strong concentration in the technology sector. This has been a key factor in its long-term outperformance. Companies like Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), and Tesla have driven the index’s growth.

Tech Boom: Over the past few decades, the technology sector has outpaced most other sectors in terms of innovation and growth, particularly with the rise of the internet, smartphones, and cloud computing. The NASDAQ-100 is more heavily weighted towards tech compared to other indices like the S&P 500 or Dow Jones Industrial Average.

Historical Performance: Over long periods, the NASDAQ-100 has consistently provided high annualized returns, often outperforming broader indices like the S&P 500, especially during bull markets driven by technological advancements.

Innovation & Market Leadership: Many of the companies in the NASDAQ-100 are not only leaders in their respective industries but are also the driving forces behind the global economy, particularly in the areas of technology, health, and consumer services.

Performance:

From 1985 to 2024, the NASDAQ-100 has outperformed both the S&P 500 and the Dow Jones Industrial Average, with annualized returns averaging around 12-14% per year in some periods (depending on the exact time frame). The index has posted remarkable gains, particularly during the tech boom in the 1990s and the 2010s, and it has often led in terms of long-term total returns.

Comparison to Other Indices:

S&P 500: While the S&P 500 offers broad exposure to the entire U.S. economy and is considered a benchmark for U.S. equities, it tends to have lower growth than the NASDAQ-100 due to its diversification across sectors. The S&P 500 has historically provided annualized returns around 8-10% over long periods.

Dow Jones Industrial Average: The DJIA has had strong long-term performance but generally lags behind both the NASDAQ-100 and S&P 500 in terms of growth, due to its narrower focus on 30 large, blue-chip stocks.

The NASDAQ-100 has historically been the best-performing index of all time due to its heavy weighting in technology stocks, which have driven much of the market’s growth over the last few decades. Investors looking for high growth potential over the long term have often found the NASDAQ-100 to be an excellent choice, though it can also be more volatile during market corrections.

Lauren Hua is a private client adviser at Fairmont Equities.

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