Index Investing Tutorial
The NASDAQ Composite Index
The NASDAQ Composite Index represents all the stocks that trade on the NASDAQ stock market. The recent surge in popularity of technological stocks has launched the NASDAQ into the spotlight. Consequently, the composite index has become one of the premier indexes.
Don't confuse the NASDAQ composite with the NASDAQ 100, which is comprised of the 100 largest non-financial companies on the NASDAQ stock market.
Advantages: The NASDAQ Composite is heavily weighted in technology and Internet stocks. As such, the companies listed in the Composite are considered to have high growth potential.
Disadvantages: Companies on the NASDAQ tend to be more speculative and risky than those listed on the NYSE. Because of this, the NASDAQ composite index is much more volatile than other broad indexes. The advantage of being mostly tech can also be a disadvantage. That is, when tech suffers, so does this index.
Investing: As far as we know, there aren't any index mutual funds that track the NASDAQ composite. An alternative is the NASDAQ 100, which is extremely easy to buy either through an index fund or the QQQ (the Exchange-Traded Fund (ETF) that tracks the NASDAQ 100).