NASDAQ investment mistakes: Common errors Indians should avoid
Indian investors sent $1.70 billion into overseas equities through the LRS route in FY25. That number grew 12.5% year over year, even as total outward remittances fell. The appetite for NASDAQ stocks among Indian retail investors has never been stronger.
Yet most investors leave significant money on the table. DALBAR's 2025 study found the average equity investor earned 16.54% in 2024 while the S&P 500 returned 25.02%. That 848-basis-point gap marks the fourth-largest shortfall since tracking began in 1985. Investors have now underperformed the market for fifteen straight years.
Understanding the common mistakes to avoid when investing in global stock markets can help you stay on the right side of those numbers.
The NASDAQ-100 returned 21% in 2025 and rewarded patient, disciplined investors handsomely. But the headline number hides brutal intra-year volatility. The index dropped by more than 20% from peak to trough between January and April alone. Those who made common NASDAQ investing mistakes during those wild swings saw drastically different results. Here are seven errors Indian investors should avoid.
Chasing momentum blindly
Chasing momentum stocks is the fastest way to destroy your NASDAQ returns. Investors pile into stocks after massive rallies and buy at exactly the wrong time.
Super Micro Computer tells this story perfectly. SMCI surged from $290 to $1,200 in early 2024 on AI server hype. Then it collapsed by 82% from its highs following allegations of accounting fraud and an auditor's resignation. Investors who bought at the peak, when SMCI joined the S&P 500 in March 2024, suffered significant losses.
SoundHound AI followed a similar arc. The stock gained 790% in 2024 on excitement around voice AI. It then dropped 50% in 2025 while trading at a price-to-sales ratio above 31. The company reported a negative free cash flow of $111 million and has significantly diluted its shareholders since its IPO.
IonQ soared 1,800% in 2024 on quantum computing hype. It crashed by roughly 40% in early 2025 after industry leaders said meaningful quantum adoption was decades away.
The pattern repeats every cycle. A stock runs up on a narrative. Retail investors jump in after the move. The story fades, or reality disappoints. Latecomers absorb the losses while early investors exit quietly.
Before buying any momentum stock, ask yourself one question. Would you still buy it at this price if no one were talking about it?
Overconcentration in tech
Most Indian investors believe that buying a NASDAQ-100 ETF provides a diversified U.S. portfolio. It does not—the top ten stocks in the NASDAQ-100 account for roughly 70% of the entire index weight.
Apple and Nvidia each hold around 12% of the index. Microsoft sits near 9%. Add Amazon, Alphabet, Meta, and Tesla, and the Magnificent Seven alone control about 40% of the index. Technology stocks account for nearly half of the NASDAQ-100.
This overexposure to tech amplifies downside risk during sector rotations. In the 2022 bear market, the Magnificent Seven fell 41.3%. The broader S&P 500 declined only 19.4%. Tech-heavy investors suffered more than double the pain.
The concentration grew so extreme that NASDAQ conducted a special rebalancing in July 2023. It was only the third such action in the index's history. Even after rebalancing, the index failed to meet SEC standards for a diversified fund.
Indian investors who hold Motilal Oswal Nasdaq 100 ETF, Mirae Asset NYSE FANG+ ETF, or similar products carry far more single-sector risk than they realise. Spread your U.S. allocation across sectors, market caps, and geographies to build genuine diversification.
Ignoring valuations
The NASDAQ-100 trades at a trailing P/E ratio of roughly 33 as of early 2026. That sits 48% above its 20-year average of 22.3 and 35% above the historical median of 24.4.
The broader S&P 500 Shiller CAPE ratio stands at 40 — a level reached only once before, during the 1999 dot-com peak. After the CAPE crossed 40 in 1999, the S&P 500 declined 37% over the following two years.
Ignoring valuations does not mean you should avoid NASDAQ stocks entirely. Today's valuations have stronger earnings support than those in the dot-com era. The Magnificent Seven earn net profit margins of 25.8% compared to the S&P 500 average of 13.4%.
However, Magnificent Seven earnings growth is decelerating. It slowed from 36.8% in 2024 to an expected 17.1% in 2025. At the same time, the remaining S&P 493 stocks are accelerating their earnings growth toward 9.2%.
The takeaway is simple. Pay attention to what you pay for a stock. High prices demand high future growth. When growth slows, expensive stocks fall faster and harder than fairly valued ones.
Panic selling in corrections
The NASDAQ experienced extreme swings in 2025. Investors who panicked during the dips missed one of the strongest recoveries in market history.
On January 27, 2025, Nvidia lost $589 billion in a single day after the DeepSeek AI announcement shocked markets. The NASDAQ Composite fell 3% that session alone.
Then came April 2025. Trump's sweeping tariff announcement on April 2 triggered the worst two-day sell-off since COVID. The NASDAQ lost 1,600 points on April 3. Markets erased $6.6 trillion in value over just two trading days.
The NASDAQ briefly entered bear market territory, down over 20% from its December 2024 peak. Fear reached extreme levels as the VIX spiked to 45.
But here is what happened next. Trump announced a 90-day tariff pause on April 9. By June 27, both the S&P 500 and NASDAQ closed at all-time highs. The entire crash reversed in under three months.
Panic-selling corrections are the single most expensive behavioural mistake an investor can make. Research from J.P. Morgan shows that missing just the ten best market days over twenty years cuts total returns by 54%. Hartford Funds found that 78% of the market's best days occur during bear markets or in the first two months of a bull recovery.
Indian investors face an added layer of difficulty here. Time zone differences mean NASDAQ volatility plays out while India sleeps. Waking up to a 5% overnight drop triggers emotional reactions that rarely serve your long-term interests. The smartest response to a correction is usually no response at all. Stay invested and let your original thesis play out.
Not understanding your holdings.
Many Indian investors buy NASDAQ stocks based on brand recognition alone. They own Apple because they use iPhones. They own Tesla because they admire Elon Musk. They own Nvidia because everyone talks about AI.
Brand familiarity is not investment research. Understanding a company means knowing its revenue sources, profit margins, competitive position, and growth trajectory. It means reading quarterly earnings reports and understanding what drives the stock price.
The SoundHound AI collapse illustrates this perfectly. Most buyers could not explain the company's actual revenue model or path to profitability. They bought a ticker symbol attached to a popular narrative. When reality set in, they had no framework for deciding whether to hold or sell.
Before you invest in any NASDAQ stock, answer three basic questions. How does this company make money? What could go wrong with that model? And what price represents fair value based on its fundamentals?
If you cannot answer those questions, you are speculating rather than investing. You should consider a diversified index fund instead of picking individual stocks.
Overtrading erodes your returns.
Academic research proves that frequent trading destroys wealth. Barber and Odean studied 66,465 households and found that the most active traders earned just 11.4% annually. The market returned 17.9% during the same period. That 6.5-percentage-point penalty came entirely from excessive trading.
Indian investors face even steeper overtrading costs than US-based investors. Every trade incurs a 1%-1.5% round-trip currency conversion fee. Wire transfers cost ₹250 to ₹1,500 per transaction. Platform brokerage charges add another layer of friction.
Tax consequences compound the damage further. Short-term capital gains on U.S. stocks held under 24 months face your income tax slab rate — potentially 30% or higher. Long-term gains exceeding 24 months attract a 12.5% tax rate with no indexation benefit. Unlike domestic listed equities, foreign stocks do not offer the ₹1.25 lakh LTCG exemption.
TCS adds yet another friction layer. Remittances exceeding ₹10 lakh per financial year for investments attract a 20% upfront TCS. While this amount is refundable against your tax liability, it locks up capital that could otherwise compound in the market.
Every round trip in and out of NASDAQ-listed stocks costs an Indian investor 3%-5% in combined trading costs. That means your trade needs to generate at least that much profit just to break even. Over a full year of active trading, these costs compound into a massive drag on performance. The math strongly favours a buy-and-hold approach over frequent trading.
Neglecting diversification beyond NASDAQ
The NASDAQ-100 performed brilliantly from 2023 through 2025. That three-year streak of strong returns breeds a dangerous assumption: why invest anywhere else? Many Indian investors now hold 100% of their U.S. allocation in NASDAQ-focused products.
History offers a clear answer. The NASDAQ-100 fell 83% from its 2000 peak and took fifteen years to recover. Japanese stocks peaked in 1989 and still have not fully recovered their highs. No single market or sector wins forever.
Proper diversification means spreading investments across U.S. large, mid, and small-cap stocks. It means including international developed markets and emerging markets. It means holding some allocation to bonds, REITs, or other asset classes that move differently from tech stocks.
For Indian investors specifically, geographic diversification serves an additional purpose. Holding U.S. dollar-denominated assets provides a natural hedge against rupee depreciation. But concentrating that entire hedge in NASDAQ tech stocks defeats the stability objective.
Consider allocating your U.S. investment to a broad market index such as the S&P 500 alongside your NASDAQ exposure. Add healthcare, consumer staples, or dividend-focused ETFs to reduce your portfolio's dependence on tech sector earnings cycles.
The goal is not to avoid NASDAQ entirely. It is to build a portfolio that grows steadily without forcing you to endure 40% drawdowns that test your resolve and trigger panic selling. A well-diversified portfolio lets you stay invested through every market cycle. That consistency, more than any stock pick, drives long-term wealth creation for Indian investors in U.S. markets.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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Invest in 11,000+ US stocks & ETFs
Indian investors sent $1.70 billion into overseas equities through the LRS route in FY25. That number grew 12.5% year over year, even as total outward remittances fell. The appetite for NASDAQ stocks among Indian retail investors has never been stronger.
Yet most investors leave significant money on the table. DALBAR's 2025 study found the average equity investor earned 16.54% in 2024 while the S&P 500 returned 25.02%. That 848-basis-point gap marks the fourth-largest shortfall since tracking began in 1985. Investors have now underperformed the market for fifteen straight years.
Understanding the common mistakes to avoid when investing in global stock markets can help you stay on the right side of those numbers.
The NASDAQ-100 returned 21% in 2025 and rewarded patient, disciplined investors handsomely. But the headline number hides brutal intra-year volatility. The index dropped by more than 20% from peak to trough between January and April alone. Those who made common NASDAQ investing mistakes during those wild swings saw drastically different results. Here are seven errors Indian investors should avoid.
Chasing momentum blindly
Chasing momentum stocks is the fastest way to destroy your NASDAQ returns. Investors pile into stocks after massive rallies and buy at exactly the wrong time.
Super Micro Computer tells this story perfectly. SMCI surged from $290 to $1,200 in early 2024 on AI server hype. Then it collapsed by 82% from its highs following allegations of accounting fraud and an auditor's resignation. Investors who bought at the peak, when SMCI joined the S&P 500 in March 2024, suffered significant losses.
SoundHound AI followed a similar arc. The stock gained 790% in 2024 on excitement around voice AI. It then dropped 50% in 2025 while trading at a price-to-sales ratio above 31. The company reported a negative free cash flow of $111 million and has significantly diluted its shareholders since its IPO.
IonQ soared 1,800% in 2024 on quantum computing hype. It crashed by roughly 40% in early 2025 after industry leaders said meaningful quantum adoption was decades away.
The pattern repeats every cycle. A stock runs up on a narrative. Retail investors jump in after the move. The story fades, or reality disappoints. Latecomers absorb the losses while early investors exit quietly.
Before buying any momentum stock, ask yourself one question. Would you still buy it at this price if no one were talking about it?
Overconcentration in tech
Most Indian investors believe that buying a NASDAQ-100 ETF provides a diversified U.S. portfolio. It does not—the top ten stocks in the NASDAQ-100 account for roughly 70% of the entire index weight.
Apple and Nvidia each hold around 12% of the index. Microsoft sits near 9%. Add Amazon, Alphabet, Meta, and Tesla, and the Magnificent Seven alone control about 40% of the index. Technology stocks account for nearly half of the NASDAQ-100.
This overexposure to tech amplifies downside risk during sector rotations. In the 2022 bear market, the Magnificent Seven fell 41.3%. The broader S&P 500 declined only 19.4%. Tech-heavy investors suffered more than double the pain.
The concentration grew so extreme that NASDAQ conducted a special rebalancing in July 2023. It was only the third such action in the index's history. Even after rebalancing, the index failed to meet SEC standards for a diversified fund.
Indian investors who hold Motilal Oswal Nasdaq 100 ETF, Mirae Asset NYSE FANG+ ETF, or similar products carry far more single-sector risk than they realise. Spread your U.S. allocation across sectors, market caps, and geographies to build genuine diversification.
Ignoring valuations
The NASDAQ-100 trades at a trailing P/E ratio of roughly 33 as of early 2026. That sits 48% above its 20-year average of 22.3 and 35% above the historical median of 24.4.
The broader S&P 500 Shiller CAPE ratio stands at 40 — a level reached only once before, during the 1999 dot-com peak. After the CAPE crossed 40 in 1999, the S&P 500 declined 37% over the following two years.
Ignoring valuations does not mean you should avoid NASDAQ stocks entirely. Today's valuations have stronger earnings support than those in the dot-com era. The Magnificent Seven earn net profit margins of 25.8% compared to the S&P 500 average of 13.4%.
However, Magnificent Seven earnings growth is decelerating. It slowed from 36.8% in 2024 to an expected 17.1% in 2025. At the same time, the remaining S&P 493 stocks are accelerating their earnings growth toward 9.2%.
The takeaway is simple. Pay attention to what you pay for a stock. High prices demand high future growth. When growth slows, expensive stocks fall faster and harder than fairly valued ones.
Panic selling in corrections
The NASDAQ experienced extreme swings in 2025. Investors who panicked during the dips missed one of the strongest recoveries in market history.
On January 27, 2025, Nvidia lost $589 billion in a single day after the DeepSeek AI announcement shocked markets. The NASDAQ Composite fell 3% that session alone.
Then came April 2025. Trump's sweeping tariff announcement on April 2 triggered the worst two-day sell-off since COVID. The NASDAQ lost 1,600 points on April 3. Markets erased $6.6 trillion in value over just two trading days.
The NASDAQ briefly entered bear market territory, down over 20% from its December 2024 peak. Fear reached extreme levels as the VIX spiked to 45.
But here is what happened next. Trump announced a 90-day tariff pause on April 9. By June 27, both the S&P 500 and NASDAQ closed at all-time highs. The entire crash reversed in under three months.
Panic-selling corrections are the single most expensive behavioural mistake an investor can make. Research from J.P. Morgan shows that missing just the ten best market days over twenty years cuts total returns by 54%. Hartford Funds found that 78% of the market's best days occur during bear markets or in the first two months of a bull recovery.
Indian investors face an added layer of difficulty here. Time zone differences mean NASDAQ volatility plays out while India sleeps. Waking up to a 5% overnight drop triggers emotional reactions that rarely serve your long-term interests. The smartest response to a correction is usually no response at all. Stay invested and let your original thesis play out.
Not understanding your holdings.
Many Indian investors buy NASDAQ stocks based on brand recognition alone. They own Apple because they use iPhones. They own Tesla because they admire Elon Musk. They own Nvidia because everyone talks about AI.
Brand familiarity is not investment research. Understanding a company means knowing its revenue sources, profit margins, competitive position, and growth trajectory. It means reading quarterly earnings reports and understanding what drives the stock price.
The SoundHound AI collapse illustrates this perfectly. Most buyers could not explain the company's actual revenue model or path to profitability. They bought a ticker symbol attached to a popular narrative. When reality set in, they had no framework for deciding whether to hold or sell.
Before you invest in any NASDAQ stock, answer three basic questions. How does this company make money? What could go wrong with that model? And what price represents fair value based on its fundamentals?
If you cannot answer those questions, you are speculating rather than investing. You should consider a diversified index fund instead of picking individual stocks.
Overtrading erodes your returns.
Academic research proves that frequent trading destroys wealth. Barber and Odean studied 66,465 households and found that the most active traders earned just 11.4% annually. The market returned 17.9% during the same period. That 6.5-percentage-point penalty came entirely from excessive trading.
Indian investors face even steeper overtrading costs than US-based investors. Every trade incurs a 1%-1.5% round-trip currency conversion fee. Wire transfers cost ₹250 to ₹1,500 per transaction. Platform brokerage charges add another layer of friction.
Tax consequences compound the damage further. Short-term capital gains on U.S. stocks held under 24 months face your income tax slab rate — potentially 30% or higher. Long-term gains exceeding 24 months attract a 12.5% tax rate with no indexation benefit. Unlike domestic listed equities, foreign stocks do not offer the ₹1.25 lakh LTCG exemption.
TCS adds yet another friction layer. Remittances exceeding ₹10 lakh per financial year for investments attract a 20% upfront TCS. While this amount is refundable against your tax liability, it locks up capital that could otherwise compound in the market.
Every round trip in and out of NASDAQ-listed stocks costs an Indian investor 3%-5% in combined trading costs. That means your trade needs to generate at least that much profit just to break even. Over a full year of active trading, these costs compound into a massive drag on performance. The math strongly favours a buy-and-hold approach over frequent trading.
Neglecting diversification beyond NASDAQ
The NASDAQ-100 performed brilliantly from 2023 through 2025. That three-year streak of strong returns breeds a dangerous assumption: why invest anywhere else? Many Indian investors now hold 100% of their U.S. allocation in NASDAQ-focused products.
History offers a clear answer. The NASDAQ-100 fell 83% from its 2000 peak and took fifteen years to recover. Japanese stocks peaked in 1989 and still have not fully recovered their highs. No single market or sector wins forever.
Proper diversification means spreading investments across U.S. large, mid, and small-cap stocks. It means including international developed markets and emerging markets. It means holding some allocation to bonds, REITs, or other asset classes that move differently from tech stocks.
For Indian investors specifically, geographic diversification serves an additional purpose. Holding U.S. dollar-denominated assets provides a natural hedge against rupee depreciation. But concentrating that entire hedge in NASDAQ tech stocks defeats the stability objective.
Consider allocating your U.S. investment to a broad market index such as the S&P 500 alongside your NASDAQ exposure. Add healthcare, consumer staples, or dividend-focused ETFs to reduce your portfolio's dependence on tech sector earnings cycles.
The goal is not to avoid NASDAQ entirely. It is to build a portfolio that grows steadily without forcing you to endure 40% drawdowns that test your resolve and trigger panic selling. A well-diversified portfolio lets you stay invested through every market cycle. That consistency, more than any stock pick, drives long-term wealth creation for Indian investors in U.S. markets.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs
