Analyzing the Nasdaq Composite’s Recent Correction and Investment Opportunities
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A stock market correction occurs when a major stock market index declines between 10% and 20% from its recent highs. This scenario has unfolded with the Nasdaq Composite (NASDAQINDEX: ^IXIC) in the past three months. Following a peak on December 16, the Nasdaq Composite has dropped over 13% as of Tuesday’s close, officially entering correction territory.
Usually, there is no single cause for a stock market correction. Multiple factors often contribute, including economic conditions, political events (both domestic and international), and investor behavior.
However, there is a potential silver lining to the current Nasdaq correction: historical trends suggest that recovery may be ahead.
^IXIC data by YCharts
Historical Recovery of the Nasdaq During Corrections
Experiencing a drop in your stock portfolio can be disheartening. Yet, stock market corrections are a natural aspect of the stock market lifecycle. Over the last two decades, there have been several notable Nasdaq corrections (some leading to bear markets) and significant recoveries since their lows:
| Period | Decline (Peak to Trough) | Gains Since Trough |
|---|---|---|
| November 2021 to October 2022 | (35%) | 56% |
| February 2020 to March 2020 | (30%) | 154% |
| September 2018 to December 2018 | (22%) | 182% |
| April 2011 to October 2011 | (19%) | 647% |
| October 2007 to March 2009 | (57%) | 1,270% |
Data sources: YCharts. Percentages are rounded to the nearest whole percent and may vary based on viewing date.
Beyond the individual percentages, the broader lesson is that despite short-term declines in the Nasdaq (or major stock market indices), the long-term returns have been substantial.
While past performance does not guarantee future outcomes, historical resilience can provide investors with confidence that panic may not be warranted at this moment. This situation might present an opportunity to invest in the index while it is “discounted,” potentially increasing future gains.
Best Strategies for Investing in the Nasdaq Composite
Investors looking to gain exposure to the Nasdaq Composite might consider an exchange-traded fund (ETF) that tracks the index. One viable option is the Fidelity Nasdaq Composite Index ETF (NASDAQ: ONEQ).
This ETF includes over 870 holdings but does not mirror the Nasdaq Composite perfectly, which encompasses nearly every stock listed on the Nasdaq stock exchange. Still, it remains a cost-effective way to invest in the index.
Here are the ETF’s top 10 stock holdings:
| Company | Percentage |
|---|---|
| Apple | 11.92% |
| Nvidia | 9.97% |
| Microsoft | 9.62% |
| Amazon | 7.28% |
| Meta Platforms | 4.74% |
| Alphabet (Class A) | 3.24% |
| Alphabet (Class C) | 3.11% |
| Tesla | 3.07% |
| Broadcom | 3.04% |
| Costco Wholesale | 1.50% |
Data source: Fidelity. Percentages as of Feb. 28.
Investing in this ETF provides exposure to leading global companies, although it is heavily weighted towards the tech sector, which comprises nearly half of the fund.
Adopt a Long-Term Perspective in Investing
Since its inception in September 2003, this ETF has navigated through prosperous and challenging times. Notably, it has consistently outperformed the S&P 500, the common benchmark for stock and ETF performance.
ONEQ data by YCharts
Investors are encouraged to focus less on timing the market and more on strategies like dollar-cost averaging. This approach involves investing a fixed amount regularly, regardless of the current stock prices.
By committing to this investment schedule, you will be purchasing stocks at various price levels, helping to balance out market fluctuations over time.
Seize a Unique Investment Opportunity
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Currently, we are issuing “Double Down” alerts for three remarkable companies, and the opportunity to act may not arise again for some time.
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*Stock Advisor returns as of March 10, 2025
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and advises the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
