BOSTON ( TheStreet) -- Investors who built their stock portfolios based on the S&P 500 during the past two years to reduce risk would have been better off picking the Nasdaq 100, which offers lower volatility and stronger return potential.S&P followers exposed themselves to weak financial and real estate stocks, which contributed to a 16% decline in the benchmark during the past two years. The Nasdaq 100, which holds the biggest tech stocks, advanced 2.9% during that time. Since February 2005, the Nasdaq 100 has returned 4.1% annually, on average, beating the S&P's 0.2% increase. The bullish run of 2009 has quietly petered out in 2010 as indicators post conflicting numbers and investors question whether the economy is improving. Broad market indices have started to flag as hot sectors are held back by those with lingering issues. Until employment starts to increase, investors must identify undervalued sectors to maintain their gains. This approach is also known as an "enhanced index strategy." Its benefits can be seen in the graph below, which illustrates the performance gap between the S&P 500 and the Nasdaq 100 during the past two years. An investor who bought stocks in the Nasdaq 100 two years ago would have lost less than an investor in the S&P 500 would have in the first year and would have gained more than the S&P investor during the most recent year.