"Nasdaq's Index Overhaul: What it Means for Your Portfolio"
Nasdaq is planning a special rebalancing of its Nasdaq 100 index to address the concentration risk posed by the dominance of a few large tech companies. The rebalancing, set to take effect on July 24, aims to redistribute the weights of individual stocks to reduce the aggregate weighting of the biggest stocks below 40%. The move comes as the Nasdaq 100 has surged 40% this year, largely driven by a handful of megacap tech names. While the impact on the broader stock market rally is expected to be minimal, the rebalancing could benefit investors by increasing dividends received from ETFs and mutual funds tracking the index. However, there may be short-term costs associated with the rebalancing as investors front-run the trade.