This index shows the average capitalization of several thousand stocks that are listed on the main U.S. exchange. This index is based mostly on companies that have to do with technology.
Its little brother is the NASDAQ100, which contains only the hundred most important American companies and none of them are for-profit. Also, as part of the index you can find companies from the health care sector, they are about ten percent.
Below are just a few of the companies in the index:
- Apple-almost 10%
- Microsoft – 8.8%
- Amazon – 7.48%
- Facebook – 3, 59%
- Tesla – 2.82%.
- PayPal – 1.48% and others.
The Nasdaq Composite Index primarily defines and measures the capitalization of companies. It is based on the value of securities. There are some giant companies, such as, for example, APPLE, which, by the way, works well outside the U.S., and its capitalization has already exceeded $2 trillion a few years ago, significantly outperforming its competitors on the index.
Often the index is a marker for evaluating the performance of some funds, the indices are often used by investment managers. Some other funds that have a different direction often use the Nasdaq Composite indices to gauge their performance.
How you can make money on this index
It is not possible to do so directly, but there are plenty of different funds that monitor the performance of the index and offer their portfolios at little cost.
For example, among ETFs, there is the investment fund company Trust, which specializes in the Nasdaq 100 index and has a small deduction ratio of 0.2 percent.
Probably many of you are wondering how companies are selected before getting into this exchange, for a start, the company must adhere to the principle of uniqueness, that is, if it is the United States, the company must be exclusive to the Nasdaq exchange. At the same time, no exchange-traded funds, closed-end funds, mutual funds will ever be included in this index.
Many people hear about two indices, the Nasdaq Composite and the S&P 500, what is the difference between them?
Despite their outward similarity, there are a lot of differences. If the Nasdaq Composite is based on companies listed on the Nasdaq exchange and is focused on technology.
The SNP500 is one of the most significant indices in the world economy, comprising securities of five hundred of the largest and most important companies of the American economy. Although, in total. On the stock exchange NASDAQ you can buy stocks of several thousand companies, it would seem that the shares of five hundred companies are just a small fraction, but this is far from it, the share of companies in the index accounts for up to 80 percent of the capitalization of the entire U.S. securities market.
Some companies in the SNP500 make profits outside America as well. For example, companies like Pepsi, Visa, and McDonalds.
Some analysts think that the Nasdaq Composite index is significantly overvalued.
As a rule, the companies that get into this index begins to cost more than their real price. This is due to the unqualified optimism that this index evokes. In reality, it may be nothing more than a bubble like in the late nineties. But at the time, it had to do with the development of the Internet in the first place, and when the Nasdaq was down 80% by the spring of 2000, as it was in deep drawdown for the next 15 years.
Some financiers foresee the birth of a new Nasdaq bubble, and many securities of companies, such as Tesla or NVIDIA shares have significantly increased in value, only after some time will be possible to determine whether these companies can meet the expectations of investors.
In conclusion, we can add that indices are the most important indicators of the financial health of the country. But serious investors will always take the NASDAQ Composite into account, because in the age of technological development, this index shows the real state of affairs in the sphere of innovation. It is not possible to invest directly in the index, but various funds and ETFs, many of which focus on this particular index, will be helpful.