What is the Nasdaq Composite Index?
Key Points
The NASDAQ is an index that reflects changes in the Nasdaq stock market.
The characteristics of the NASDAQ include the widest coverage and the most components.
Since its establishment in February 1971, by the end of 2020, the NASDAQ has risen approximately 128 times in 50 years.
Concept Explanation
The American stock market symbolized by Wall Street is currently the world's largest and most well-regulated capital market. The Nasdaq Composite Index is the most widely influential market index in the U.S. stock market and is also the most sensitive nerve of the U.S. economy.
The Nasdaq Composite Index is a stock index that reflects changes in the Nasdaq stock market, abbreviated as the Nasdaq. The Nasdaq is calculated based on the common stocks of both domestic and foreign listed companies on the Nasdaq market. The component stocks of the Nasdaq are mainly composed of rapidly developing advanced technology, telecommunications, and biotech companies. Household names like Microsoft, Intel, Amazon, and other well-known high-tech companies are included in the Nasdaq component stocks.
Index Characteristics
Widest coverage: Unlike the Dow and S&P 500 indices, the components of the Nasdaq are not limited to companies within the USA, but also include companies listed on the Nasdaq from other countries around the world, such as Alibaba, jd.com, and other Chinese concept stocks.
Most components: The Nasdaq has over 3000 component stocks, far more than the 500 companies in the S&P 500 index and the 30 in the Dow.
Index Performance
Since its establishment in February 1971, the Nasdaq has risen from an initial value of 100 points to 12,888 points at the end of 2020, an increase of about 128 times over 50 years, with an average annual ROI of about 10.1%.
During this 50-year period, the Nasdaq experienced the burst of the dot-com bubble and stock market crash from 2000 to 2003, with the index dropping from 5000 points to 1100 points at one point. If calculated from 2010, the period between 2010 and 2020 saw the Nasdaq rise by about 4.68 times, with an average annual ROI of about 17.1%, while the S&P 500 index had an average annual ROI of about 11.7% during the same period, and the Dow had around 10.3%.
