One thing to keep in mind with these indexes. They are made up of a basket of stocks and that basket is changing. Unsuccessful companies lose market cap and get replaced by others whose market caps are growing (and pass the market caps of those being dropped from the index). The Nasdaq is now dominated by big names such as Google and Apple and many of these big names are also included in the S&P 500 and the DOW. Those companies have had enormous growth and that is reflected in their market caps and that reflects on the Nasdaq. So while the Nadaq has seen a big advance over the last 20 years, much of that would be because of the huge growth in these companies. As other companies falter and get dropped from the index, they get replaced by other fast growing companies. This allows these indexes to grow much faster and more sustainably than they would do if the re-balancing did not occur and weaker companies were left in the index. Of course there will be times when the index will overshoot either way but the re-balancing allows these indexes to sustain strong growth in the long term.
MWR Price at posting:
$3.23 Sentiment: Buy Disclosure: Held
