The Nasdaq-100 will undergo a special rebalance on July 24, 2023, as the top seven companies’ combined weight exceeds 48%. To address this, the rebalance will cap their total weighting at 40%.
Affected companies include Microsoft, Apple, Nvidia, Amazon, Tesla, Alphabet, and Meta Platforms. Their combined weighting in the Nasdaq-100 increased from 40.9% in 2021 to 48.1%.
The rebalance aims to make the index more representative of the overall stock market and reduce the risk of a few companies overly influencing its performance.
Investors should expect significant impacts on the affected companies’ prices due to the rebalance. As portfolios are adjusted, some share prices may fall, while others could rise, anticipating increased weighting.
Other 93 companies in the index won’t be affected by the rebalance, which will be implemented after the close of trading on July 24th.
Understanding that the rebalance is part of the index’s methodology is essential. It does not imply any inherent problems with the stock market.
In conclusion, the Nasdaq-100 rebalance has far-reaching implications. Careful portfolio adjustments and awareness of potential impacts are crucial for investors. The broader aim is to maintain the index’s representation and manage the risk of concentrated influence from a few companies.
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