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Mailing Address

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Nasdaq is the second-largest stock exchange on earth, after the NYSE. It also operates two benchmark stock indexes based on companies that trade on its exchange: the Nasdaq Composite and the Nasdaq 100.

The Nasdaq Composite tracks the performance of more than 2,500 stocks listed on the Nasdaq while the Nasdaq 100 captures the performance of the exchange’s largest non-financial companies.

What Is the Nasdaq Composite?

The Nasdaq Composite Index is one of the most widely followed stock indexes in the U.S. Together with the Dow Jones Industrial Average and the S&P 500, it’s one of the three most popular stock indexes cited by market commentators to represent how the stock market as a whole is performing on any given day.

Widely known simply as “the Nasdaq,” this index tracks nearly all of the companies that are listed on the Nasdaq stock exchange. To be listed on the exchange and therefore be included in the composite, a stock must be listed exclusively on the Nasdaq stock exchange (or have been grandfathered into a dual listing) as well as be a common stock of a domestic company or be an ADR of a foreign company.

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.

As a market-cap-weighted index, each company included in the Nasdaq Composite is weighted based on its total market capitalization, or the market value of its outstanding shares. Big companies with larger capitalizations therefore have a more significant impact on the index’s performance than smaller companies.

For example, while the Nasdaq Composite Index contains thousands of securities, just the 10 biggest companies in the index make up roughly 50% of its total portfolio by cumulative market capitalization. Those top 10 companies in the Nasdaq Composite Index are:

Nasdaq Composite Index Top 10

How Many Stocks Are In the Nasdaq Composite?

The Nasdaq includes more than 2,500 stocks. They’re all listed on the Nasdaq Stock Market. The index, then, measures cumulative performance of all of its constituent stocks.

About 55% of the benchmark’s value consists of stocks in the technology sector. That’s the index’s biggest sector by far. Its second biggest sector is consumer discretionary, with less than 20% of the benchmark’s value. Health care is a distant third sector, with stocks accounting for about 8% of the bogey’s value. The remaining companies are in stock sectors like utilities, oil and telecommunications.

Nasdaq Composite Performance

Over the past more than 10 years, the Nasdaq Composite has outperformed other major stock market indexes. 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.

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.

Nasdaq 100 vs Nasdaq Composite

The Nasdaq 100 is much narrower in scope than the Nasdaq Composite: It tracks the 100 largest companies by market capitalization that are listed on the Nasdaq stock exchange, excluding financial sector firms. The companies tracked by the Nasdaq 100 index include more than 90% of the market capitalization of the Nasdaq Composite index. The ticker symbol for the Nasdaq 100 is NDX.

The Nasdaq 100 index uses what it calls a modified market cap weighting, although generally the largest component stocks have the biggest impact on the Nasdaq 100’s value. Nasdaq uses a somewhat complicated methodology to determine the index weighting, which primarily relies on market capitalization, plus certain other thresholds to prevent the largest stocks from having too great an impact on performance.

Much like its sister index, the Nasdaq 100 is heavily weighted toward technology industry companies, which account for well over 60% of the index’s weighting. That said, the Nasdaq Composite gives a more representative sample of all of the equities listed on the Nasdaq exchange, with a broader view of the stock market as a whole.

The weighting of companies included in the Nasdaq 100 is rebalanced once a quarter, in March, June, September and December. Companies that no longer meet the Nasdaq 100’s rules for inclusion are replaced with new firms once a year in the third week of December.

How to Invest in a Nasdaq Index

The easiest way to invest in companies in the Nasdaq Composite is through index mutual funds and ETFs, both of which seek to emulate the performance of particular indexes.

When you buy shares of index funds and ETFs, you’re purchasing a portfolio of securities. These may contain hundreds or thousands of companies’ stocks, depending on the index you select, which instantly diversifies your portfolio.

How to Invest in the Nasdaq Composite

There are several funds that mimic the performance of the Nasdaq Composite, including these two popular options:

• Fidelity Nasdaq Composite Index Fund (FNCMX). The goal of this index fund is to provide results that closely mirror the price and returns of the Nasdaq Composite.
• Fidelity Nasdaq Composite Index ETF (ONEQ). This ETF invests 80% of its assets in the component companies of the Nasdaq Composite.