Nasdaq 100 Index: What It Is, How It’s Weighted and Traded

It beat the S&P 500 in seven of the 10 years ended Aug. 10, 2023. Its cumulative return for that decade was 316% vs. 219% for the S&P 500. Closed-end funds, convertible bonds, exchange-traded funds, preferred stocks, rights, warrants, units and other derivatives are not included in the index. If at any time a component security no longer meets the required criteria, the security is removed from the index. A stock market index shows how investors feel an economy is faring. An index collects data from a variety of companies across industries.

  1. Since there is a high concentration of technology firms listed on the Nasdaq stock exchange, the Nasdaq Composite is generally considered a stand-in for the performance of the overall tech industry.
  2. The Nasdaq computerized trading system was initially devised as an alternative to the inefficient specialist system, which was the prevalent model for almost a century.
  3. The Nasdaq 100’s liquidity criteria require that each security have a minimum average daily trading volume of 200,000 shares (measured over the previous three calendar months).
  4. The index, then, measures cumulative performance of all of its constituent stocks.
  5. The total return index assumes the reinvestment of cash dividends distributed by companies included in the index.

This eliminates any bias as portfolio managers only make adjustments when the index does. The exchange operates 29 markets enabling the trading of stocks, derivatives, fixed income, and commodities in the U.S., Canada, Scandinavia, and the Baltics. The company also runs a clearinghouse and five central securities depositories in the United States and Europe.

That’s because they are made up of stocks from a wide range of different sectors. For instance, the Nasdaq is heavily focused on technology stocks but also has exposure to consumer discretionary, healthcare, and financial stocks among others. There are more than 5,000 companies that trade on the exchange, including domestic and international firms. While its heavy tech weighting is responsible for much of its current outsize returns, it’s also led to similarly disproportionate drops. The 2008 recession and dot-com bubble, for example, caused the Nasdaq Composite to plummet as technology companies shut their doors. But over time, it recovered and surpassed other indexes as growth-focused tech companies thrived.

Investing in the Nasdaq Composite

The flip side of such ling-term success in an index based on market capitalization is that the Nasdaq Composite is very top-heavy. The top five companies (and six stocks including both traded classes of Alphabet’s shares) account for more dunn bob enterprises inc murray than 40% of the Nasdaq Composite’s index weight. There are assets like mutual funds or exchange-traded funds (ETFs) that are composed of the same stocks with the same weightings that try to at least match the index’s performance.


Nasdaq reported total net income of $1.12 billion on total revenue of $6.23 billion for the 2022 fiscal year ending Dec. 31, 2022. Revenue less transaction-based expenses came in at $3.58 billion. The company also increased the quarterly dividend per common share to $0.78 in 2022 from $0.70 in 2021. The Nasdaq computerized trading system was initially devised as an alternative to the inefficient specialist system, which was the prevalent model for almost a century. The rapid evolution of technology has made Nasdaq’s electronic trading model the standard for markets worldwide. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.

Nasdaq 100 Index: What It Is, How It’s Weighted and Traded

The index excludes those in the financial sector, like commercial and investment banks. The Nasdaq 100 index tracks the largest 100 companies by modified market cap trading on Nasdaq exchanges, so investors cannot directly invest in it. However, there are many other ways to gain exposure to the index without buying the individual stocks included in the index. Like most major stock indexes, the Nasdaq Composite is weighted by the market capitalizations of its underlying components.

The level of the Nasdaq Composite Index fluctuates continuously during stock market trading hours. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on, top-rated podcasts, and non-profit The Motley Fool Foundation. Changes in the share price as a result of corporate actions such as stock splits, stock dividends, or spinoffs are tallied on the action’s ex-date.

Is the Nasdaq a U.S. Stock Market?

Changes in total shares outstanding following conversions, stock repurchases, secondary offerings, or acquisitions are usually reflected on the night before the action’s effective date. Nasdaq Inc. is listed on the Nasdaq stock market under the symbol NDAQ and has been part of the S&P 500 Index since 2008. The Nasdaq Composite closed at a record high of 16,057.44 on Nov. 19, 2021. The index proceeded to drop more than 23% from that point through April 2022. The Nasdaq Composite’s 13.3% decline in April 2022 was its worst monthly drop since October 2008, when the index lost 17.4% amid the global financial crisis. Nasdaq officially separated from the NASD and began to operate as a national securities exchange in 2006.

Together, that data forms a picture that helps investors compare current price levels with past prices to calculate market performance. Just like with the Nasdaq Composite, there are mutual fund and ETF products that allow investors to track the Nasdaq-100 Index in their portfolio. Most notable is the Invesco QQQ (QQQ 0.11%) ETF, which proportionally invests in the 100 index components for a low expense ratio of 0.2%. For example, Fidelity offers two investment vehicles that track the Nasdaq Composite. On the mutual fund side, the Fidelity Nasdaq Composite Index fund (mentioned above) has a 0.30% net expense ratio and no minimum investment. Fidelity also offers its Nasdaq Composite Index ETF (ONEQ 0.2%), which trades like any other stock and has a lower expense ratio of 0.21%.

The performance of the index allows investors to understand the performance of a part of the economy and make investment decisions based on that data. The easiest way to invest in the Nasdaq Composite Index is to buy an index fund, which is a mutual fund or ETF that passively tracks the index. An index fund is designed to invest in all of the components of a stock index and in the same weights as the index.

The Nasdaq 100 and the S&P 500 are stock market indexes that track the performance of some of the world’s largest companies. Both indicate the market’s performance—you’ll hear their latest closing numbers in most national news summaries. The Nasdaq includes 100 companies, while the S&P includes 500 companies, but the differences between the two are greater than that.

Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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