Glossary · Stocks and markets
Nasdaq Composite
The Nasdaq Composite is a stock index of almost all the companies listed on the Nasdaq exchange, weighted by market value and dominated by technology firms.
Also called: Nasdaq, Nasdaq index, COMP, IXIC
In plain words
Nasdaq is a US stock exchange, the first electronic one, opened in 1971. The Nasdaq Composite is its main index: it includes almost every company whose shares are listed there, which means thousands of them.
Many of the world’s largest technology companies are listed on Nasdaq, so the index leans heavily toward tech. When people say “tech stocks fell today”, they often point to the Nasdaq.
Like the S&P 500 it is weighted by market value, so a handful of giants make up a large part of it. Its smaller sibling, the Nasdaq-100, holds just the 100 largest non-financial companies; that is the one many funds copy.
Example
The dot-com round trip
The Nasdaq Composite is the classic example of a bubble:
- It started at 100 on February 5, 1971.
- In the late 1990s internet stocks soared, and on March 10, 2000 it closed at a record 5,048.
- By October 2002 it had fallen to 1,114: a loss of 78%.
- It did not close above its 2000 record again until April 2015, fifteen years later.
Daily closing levels, price only, before dividends and inflation.
One level deeper
Nasdaq began in 1971 as a computer network showing dealers’ prices, at a time when the NYSE still traded on its floor. Young companies that could not, or would not, list on the NYSE went there, and some of them grew into today’s giants.
The index includes the common shares of US and foreign companies listed on Nasdaq; funds, preferred shares and similar securities are left out. Its members change all the time as companies list and leave.
Because tech companies weigh more in it, the Nasdaq usually swings more than the S&P 500: it tends to rise faster in booms and fall further in busts. That makes it more volatile, not necessarily better or worse over time.
Why it matters
It is the market’s tech barometer: when investors grow excited or nervous about technology, the Nasdaq shows it first and most.
The Nasdaq-100, its large-company cousin, is one of the most copied indexes in the world through funds and ETFs.
Its rise and fall in 1995–2002 is the textbook case of a bubble.
A common mistake
Myth: The Nasdaq is only tech companies.
In fact: Tech is the largest part, but the index also holds drugmakers, retailers, food companies, banks and many others: any company that chose to list on Nasdaq.
Questions people ask
What is the difference between the Nasdaq Composite and the Nasdaq-100?
The Composite holds almost all the stocks listed on Nasdaq, thousands of them. The Nasdaq-100 holds only the 100 largest non-financial ones; it is the index most Nasdaq funds follow.
Is the Nasdaq riskier than the S&P 500?
It has usually swung more, because it leans toward technology and fast-growing companies. From its 2000 peak it lost 78% by 2002; the S&P 500 lost about half.
Why do companies list on Nasdaq instead of the NYSE?
Costs, image and history: Nasdaq became the home of young tech companies, and many stayed as they grew. For the people buying the shares there is no practical difference.
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About the numbers
- This page explains a term. It is not investment advice.