The NASDAQ vs The Dow
At the end of November last year, I wrote a post comparing the NASDAQ and the Dow and suggested that the NASDAQ was a much better place to be investing than the Dow. Of course, to some extent, I was talking my own game because the kinds of companies we invest in most often end up trading on the NASDAQ if they go public. The NASDAQ is full of venture backed success stories and the Dow is full of tired old multinational companies that are "too big to fail".
In the four and a half months since I wrote that post, the NASDAQ has been up 6.2% and the Dow has been down 8%, for a net spread of 14.2%.
Now first I will say that I did not put on a trade to go long the NASDAQ and short the Dow when I wrote that post so shame on me. And further, this could all unwind in the coming months and not last.
But I think otherwise. I believe the NASDAQ has many companies that are worth investing in and owning and the Dow has many companies that aren't. If I had to bet, and like last November, it's unlikely that I will, I'd bet that the NASDAQ will continue to outperform the Dow for some time to come.
I also believe that we will see the return of an active IPO market this year. We've already seen one IPO, ChangeYou, a chinese online games company, and I think we'll see at least a few more in the coming months.
The NASDAQ is down 60% this decade and the Dow is only down 40% this decade. And yet, the NASDAQ has way more companies that are built for the 21st century than the Dow does. That's a recipe for outperformance in my book.