Nasdaq Indices

Definition

The Nasdaq represents the stock market index for the Nasdaq Stock Market, which is heavily weighted towards the technology and growth sectors. * It is the home of the world's most innovative companies, including the "Magnificent Seven" (Apple, Microsoft, Nvidia, etc.).

Two Main Indices

It is crucial to distinguish between the two: 1. Nasdaq Composite: Includes almost all stocks (over 3,000) listed on the Nasdaq exchange. It gives a broad view of the tech sector. 2. Nasdaq-100 (NDX): Comprises the 100 largest non-financial companies listed on Nasdaq. This is the benchmark for most traders and ETFs (like QQQ) because it filters out smaller, riskier companies and focuses on the blue-chip tech giants.

Key Characteristics

• Tech-Heavy: While the S&P 500 covers all sectors, Nasdaq is dominated by Technology, Communication Services, and Consumer Discretionary (like Amazon/Tesla).
• Volatility: Because growth stocks are priced based on future earnings potential, they are more volatile than defensive stocks found in the Dow.
• Interest Rate Sensitivity: Nasdaq stocks are highly sensitive to the Fed's interest rate policy. High rates hurt growth valuations (Discounted Cash Flow), while low rates fuel their rallies.

Investment Significance

• For investors seeking capital appreciation rather than dividends, the Nasdaq-100 has historically outperformed other major indices over the long term, albeit with higher risk.