Nasdaq-100 Peak Buy: A 26-Year Test of Patience

The Nasdaq-100 index reached its peak on March 27, 2000, closing at $117.75. This was more than two weeks after the broader Nasdaq Composite had already peaked on March 10, 2000.

From there, the fund fell in stages for about two and a half years, bottoming out on October 9, 2002, at $20.06, an 83% decline from the peak.

The investment took nearly 15 years to recover, with the share price not closing above its previous peak until September 2016. During this time, some of the biggest companies in the index, such as Cisco Systems and Intel, still had a long way to go before reaching their pre-bubble highs.

The reason for the index's faster recovery, according to the author, is its design. The Nasdaq-100 holds the 100 largest non-financial companies listed on the Nasdaq, with the biggest companies having the biggest weights. This means that as leadership shifts within the index, so does the composition of the fund.

Zooming out, even from the worst entry point in the fund's history, the long-term pace was respectable, with a total return of about 7.8% annualized over 26 and a half years.