If you own a Nasdaq-100 index fund, you have probably seen headlines about stocks being “added” or “kicked out” of the index, or about a “special rebalance”. Knowing how Nasdaq-100 rebalancing works helps you understand why your fund’s holdings shift a few times a year, and why some share prices move sharply around those dates.
This explainer is written for US investors and anyone who holds a fund that tracks the index. It covers the eligibility rules, the December reconstitution, the quarterly rebalance, the weight caps that stop a few giants from dominating, and what all of it means for you. It is educational only and is not personal investment advice.
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What Is the Nasdaq-100 Index?
The Nasdaq-100 tracks 100 of the largest non-financial companies listed on the Nasdaq Stock Market. Banks and other companies that the Industry Classification Benchmark (ICB) places in the Financial industry are not eligible, which is why the index leans heavily toward technology, consumer and healthcare names.
The index is weighted by a modified market capitalization. In simple terms, bigger companies get bigger weights, but Nasdaq applies caps so no single company or small group of companies can take over the index.
Who can get in?
Nasdaq’s official Nasdaq-100 methodology sets out the main eligibility rules:
- Listing: the company must be primarily listed on a US Nasdaq exchange (the Nasdaq Capital Market tier is excluded).
- Industry: companies in the Financial industry are excluded. Real estate companies can qualify if they are not organized as a REIT. SPACs are not eligible.
- Liquidity: a three-month average daily value traded of at least $5 million.
- Seasoning: generally at least three full calendar months of trading. For the December review, a stock normally needs to be listed by the last trading day of August.
- Size: there is no minimum or maximum market cap. Ranking does the work instead.
The Annual Reconstitution: How Stocks Join and Leave
Most membership changes happen once a year, in December. Nasdaq ranks every eligible company by full market capitalization on the last trading day of November, then selects members in this order:
- The top 75 ranked companies are selected automatically.
- Current members ranked inside the top 100 stay in.
- Current members ranked 101st to 125th can keep their place, in rank order, if spots remain. This buffer stops companies near the cut-off from flipping in and out every year.
- Any remaining spots go to the highest-ranked non-members inside the top 100.
Nasdaq announces the results after the close on the sixth trading day before the change, and the new line-up takes effect at market open on the first trading day after the third Friday in December. That Friday is a quarterly options and futures expiration date, often called “quadruple witching”.
Example: the December 2025 reconstitution
On December 12, 2025, Nasdaq announced six additions and six removals, effective before the market opened on Monday, December 22, 2025.
| Added | Removed |
|---|---|
| Alnylam Pharmaceuticals (ALNY) | Biogen (BIIB) |
| Ferrovial (FER) | CDW Corporation (CDW) |
| Insmed (INSM) | GlobalFoundries (GFS) |
| Monolithic Power Systems (MPWR) | Lululemon Athletica (LULU) |
| Seagate Technology (STX) | ON Semiconductor (ON) |
| Western Digital (WDC) | The Trade Desk (TTD) |
How Nasdaq-100 Rebalancing Works Each Quarter
Between reconstitutions, Nasdaq runs a quarterly rebalance in March, June and September (December’s review happens alongside the reconstitution). The reference dates are the last trading day of February, May, August and November.
At each quarterly review Nasdaq:
- Updates each company’s index shares to reflect changes in shares outstanding, for example after buybacks or new share issues.
- Re-checks the weight caps described below and trims any company that has grown too large.
- Applies any membership changes the current methodology allows at that review. Nasdaq updates its rules from time to time, so check the latest methodology document for the details.
What happens when a company leaves mid-year?
If a member is removed between reviews, for example after an acquisition, Nasdaq only adds a replacement when the count falls below 100. The replacement is the largest eligible non-member by full market cap as of the prior month-end, and it enters at a weight interpolated between its nearest neighbours.
The Weight Caps: 24%, 20%, 4.5% and 48%
The caps are the heart of every rebalance. Without them, a handful of mega-cap stocks could make up most of the index. The methodology sets two company-level tests:
| Test | Trigger | What Nasdaq does |
|---|---|---|
| Single-company cap | Any company above 24% | Cuts weights so no company exceeds 20% |
| Large-group cap | Companies above 4.5% together reach 48% or more | Cuts that group’s combined weight to 40% |
There are also security-level limits: if any single security exceeds 15%, it is cut so none exceeds 14%, and if the five largest securities together reach 40% or more, that group is cut to 38.5%.
What Is a Nasdaq-100 Special Rebalance?
A special rebalance can happen at any time if end-of-day values break either rule: one company above 24%, or companies above 4.5% together exceeding 48%. Nasdaq does not wait for the next scheduled review.
The best-known example came in July 2023. Strong gains in the largest tech stocks pushed the combined weight of the big names over the 48% limit, so Nasdaq ran a special rebalance on July 24, 2023. It cut the aggregate weight of those large constituents so it did not exceed 40%, and it did not add or remove any companies.
Currency and macro moves can also shift the relative size of big companies over time. If you want a refresher on how the dollar affects returns for overseas investors, see our explainer on how a strong dollar affects Indian investors.
What Rebalancing Means for Index Fund Investors
Funds that track the Nasdaq-100 must match the index. When the index changes, the fund buys the stocks that go up in weight or join, and sells the ones that shrink or leave. Here is what that means in practice.
Your fund does the work
You do not need to trade anything yourself. The fund manager handles the buying and selling, and your holdings update automatically.
Expect short-term price swings around key dates
Because many funds trade on the same day, stocks joining or leaving the index can see heavy volume and sharp moves around the announcement and effective dates. Those moves are often about index mechanics rather than the company’s business. Our look at what drives Uber’s share price shows how many different forces can push a single stock around.
Concentration still matters
Even with caps, the Nasdaq-100 remains concentrated in large technology-related companies. A cap of 20% on one company is still a big position. Check your fund’s top holdings so you know what you actually own.
Keep the bigger picture in view
Index changes are routine maintenance, not a signal to buy or sell. Before investing in any market index, make sure your base is solid: a cash cushion like the one described in our guide on how to build an emergency fund, and a budget that leaves room to invest, such as the 50/30/20 budget rule.
Nasdaq-100 Rebalancing Calendar at a Glance
| Event | When | Main purpose |
|---|---|---|
| Quarterly rebalance | March, June, September (reference: last trading day of Feb, May, Aug) | Update shares and apply weight caps |
| Annual reconstitution | December (reference: last trading day of November) | Decide which 100 companies are in |
| Special rebalance | Any time the 24% or 48% rule is breached | Reduce concentration |
| Ad hoc replacement | When a member is removed mid-year | Keep the index at 100 companies |
FAQ
How often is the Nasdaq-100 rebalanced?
Four times a year on a scheduled basis, with the December review also serving as the annual reconstitution. A special rebalance can happen in between if the concentration rules are breached.
When does the Nasdaq-100 add new companies?
Mainly in December, effective at the open on the first trading day after the third Friday of the month. A company can also join mid-year to replace a member that has been removed.
Why are banks not in the Nasdaq-100?
The index excludes companies classified in the Financial industry. Nasdaq runs a separate financial index for those.
Does a rebalance change the price of my index fund?
The rebalance changes what the fund holds, not its value on the day. Your fund’s value still moves with the prices of the stocks inside it.
Conclusion
Once you know how Nasdaq-100 rebalancing works, the headlines become easy to read. December decides who is in, the quarterly reviews keep share counts and weights up to date, and the 24% and 48% triggers can force a special rebalance when a few giants grow too large. For investors in index funds, the key takeaway is simple: these changes are built-in maintenance, handled by your fund, and they are a reason to understand your fund’s concentration rather than a reason to trade.
