From January 2014 to December 2023, the NASDAQ 100 delivered a cumulative total return of approximately 480%, turning $1,000 into $5,800. The S&P 500 returned 224%, turning $1,000 into $3,240. The tech‑heavy index outperformed by more than double. The reason is simple: companies like Apple, Microsoft, Amazon, Nvidia, and Meta grew revenues and earnings at rates far exceeding the broader economy, and their stock prices followed.
But that outperformance came with significantly higher volatility. During the COVID crash, the NASDAQ 100 fell 28% peak to trough, while the S&P 500 fell 34%. In 2022, as the Fed raised rates, the NASDAQ 100 dropped 33%, compared to the S&P's 25% decline. The drawdowns in tech are deeper and more frequent. Many investors who piled into QQQ in late 2021, chasing the incredible returns of 2020, found themselves underwater by over 30% within a year.
The lesson is about risk budgeting. If you can't handle a 30%+ drawdown without panic selling, a pure NASDAQ portfolio will destroy your wealth — not because the index is bad, but because your behavior will be. For most investors, mixing a broad market index like SPY with a smaller allocation to QQQ captures much of the tech upside while smoothing out the ride.