Nasdaq Explained
Understand what the Nasdaq is, why technology companies have a major presence and how investors use Nasdaq-focused investments.
What Is Nasdaq?
Nasdaq can refer to the Nasdaq stock exchange as well as several market indexes associated with it.
The Nasdaq-100 is one of the best-known indexes and tracks 100 large non-financial companies listed on the Nasdaq exchange.
Why Is Nasdaq Associated With Technology?
The Nasdaq market has historically attracted many technology and growth-oriented companies.
As a result, major technology businesses make up a significant part of several Nasdaq-focused indexes.
This can give investors strong exposure to technology and growth sectors.
Nasdaq vs S&P 500
The S&P 500 represents a broad group of large U.S. companies across many industries.
Nasdaq-focused indexes can have greater exposure to technology and growth companies.
Because their compositions are different, their performance can also differ significantly over certain periods.
How Investors Get Nasdaq Exposure
Investors can gain exposure to Nasdaq-focused indexes through ETFs and other investment funds designed to track them.
These products allow investors to access a collection of companies without purchasing every individual stock separately.
Nasdaq Risks
Technology and growth-focused investments can experience significant volatility.
Changes in interest rates, economic expectations, company valuations and investor sentiment can have a strong effect on these stocks.
Greater growth exposure can therefore come with greater fluctuations in portfolio value.
The Long-Term Perspective
Nasdaq-focused investments can play a role in a diversified portfolio, but investors should understand the concentration and volatility associated with the underlying companies.
The appropriate allocation depends on the investor's goals, time horizon and ability to tolerate risk.