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Motley Fool Index Center
| DJIA |
Nasdaq |
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Nasdaq Composite Index
Current Value
2,682.78
+ 2.45%
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What Is It?
The Nasdaq Composite was launched in 1971 and includes more than 5,000 companies. It measures all Nasdaq domestic and non-U.S.-based common stocks listed on the Nasdaq Stock Market, including small-cap stocks. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes.
Fun Fact
The Nasdaq was the first electronic stock market, and used to be an acronym that stood for the National Association of Securities Dealers Automated Quotation. Like New Kids on the Block (NKOTB, please), it dropped the acronym and is now known only as the Nasdaq. |
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Recent Performance
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Year-to-Date
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+ 8.59%
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1-Year
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- 33.99%
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3-Year
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+ 71.66%
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Financial Statistics
(as of 12/31/99) |
| Total Market Value |
$5.20 trillion |
| Mean Market Value |
$3.30 trillion |
| Median Market Value |
$3.30 trillion |
| Average P/E |
205.5* |
| Dividend Yield |
N/A |
| * Domestic common shares and shares of beneficial interest only. Total market value divided by earnings. |
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Type of Companies
Includes a large number of technology-oriented growth companies.
Number of Companies
More than 5000
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| Based on Market Capitalization |
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Industry Composition
(as of 6/23/00) |
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# of
cos. |
% of index |
| Biotech |
200 |
5.1% |
| Banking |
636 |
3.0% |
| Other financial |
156 |
0.75% |
| Industrial |
2416 |
19.7% |
| Insurance |
75 |
0.48% |
| Transportation |
99 |
0.57% |
| Computer |
775 |
54.6% |
| Telecomm |
255 |
15.3% |
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How It Is Measured
The Index is market-value weighted, meaning that each company affects the Index in proportion to its market value. The market value -- the last sale price multiplied by total shares outstanding -- is calculated throughout the trading day, and is related to the total value of the Index. |
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Strengths
The Nasdaq contains a broad number of U.S. and internationally based companies, including many of the most important "new economy" companies. It has risen faster than any other index over the past decade.
Weaknesses
This index is not culled in any manner, all Nasdaq-listed companies are included. The historical bias of the Nasdaq Composite, both in number of companies and market cap, is toward high technology and other more speculative companies than those found on the New York Stock Exchange. Most Nasdaq investment products focus on the top 100 companies rather than the total market. The market-value weighting of the index means that the majority of companies in the Nasdaq Composite have almost no bearing on the overall performance of the Composite.
Investing in the Nasdaq Composite
As an investment vehicle, a Nasdaq Index Fund should be approached with care. Most Nasdaq index funds don't track the Composite, but rather the Nasdaq 100 (the largest companies by market cap in the index). That makes the level of diversification lower than one might otherwise expect from a Nasdaq fund; and it skews largely toward the largest 10 companies. (You may also have heard of QQQ, a security traded on the American Stock Exchange that tracks the performance of the Nasdaq 100.) The Nasdaq index products have had the best returns over the past decade, but generally have higher volatility and a higher number of transactions as companies move in and out. This generates a higher tax bill than other, lower transaction index products.
Related Links
All the info you'll need on the Nasdaq Web site
No-load mutual funds that track the NASDAQ 100 index
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