The Nasdaq Composite Index

In some senses, the Nasdaq Composite Index is sometimes seen as a competitor to the S&P, but the Nasdaq Composite is actually very different. For starters, Nasdaq measures the stock performance of 5,500 companies, nearly half of them in the telecommunications and high-tech arena, and all of them found in the Nasdaq market. The index includes companies such as Apple, Intel, MCI Communications, Cisco, Oracle, Sun Microsystems, and Netscape. As a result, the Nasdaq index is a good deal more volatile than, for example, the Dow Jones Industrial Average and, perhaps, the stock market at large. It’s also home to some of the bigger success stories of the 1990s — many of which are technology firms. The higher the potential for return an investment has, the more the risk it carries. Just like the Dow Industrial Average and the S&P 500, the Nasdaq Composite gives the average performance of the stocks in the index both as numbers and percentages. If Nasdaq goes up, your newspaper might report that “Nasdaq was up 1 point or 3% today.”
Although it will be increasingly important for investors to watch the Nasdaq Composite in the days ahead and the performance of some of its key stocks, it’s equally important to look at Nasdaq in relation to the S&P 500 — and even the Dow — to get an overall sense of how the stock market is doing. For example, if you are a short-term trader (day trader) then the Nasdaq is where you want to be. The Nasdaq stocks can offer great potential for profit and, unfortunately, for loss, as well.