Nasdaq vs. S&P 500: Understanding the difference (2024)

FAQs

Nasdaq vs. S&P 500: Understanding the difference? ›

The Nasdaq indexes focus heavily on technology companies but also include other sectors. The S&P 500 includes 500 large U.S. companies from all major industries, providing a broad market representation.

Stocks in the S&P 500 represent the biggest U.S. stocks by market capitalization. The Nasdaq Composite focuses on the top 100 non-financial stocks traded on the Nasdaq exchange. The heaviest sector representation is technology, but health care, consumer discretionary and industrials are also represented.

Key Takeaways. The DJIA tracks the stock prices of 30 of the biggest American companies. The S&P 500 tracks 500 large-cap American stocks. Both offer a big-picture view of the state of the stock markets in general.

An index tracks the performance of a group of preselected investments, such as stocks. For example, the S&P 500 index tracks the performance of 500 of the largest U.S. companies. Investors gauge the performance of stocks, bonds or mutual funds by comparing them with the performance of an index.

The S&P 500 is a stock index that tracks the share prices of 500 of the largest public companies in the United States. Formally known as the Standard & Poor's 500 Composite Stock Price Index and commonly referred to as the S&P 500, it's one of the main tools used to follow the performance of U.S. stocks.

Therefore, the downside risk is likely to be higher in case of the Nasdaq 100 when compared S&P 500 index, which has a much broader representation of the US companies across different sectors. So, if you are looking to own a more diversified basket of stocks, the S&P 500 will be the right fit for you.

Because nearly half of the exchange by weight is made up of tech companies, the Nasdaq is widely considered a better gauge for the technology industry. Some of these companies may also be included on the Dow, the S&P 500, or both.

They represent different swaths of companies and so have different properties. If we want to gauge the market performance over a specific time period or compare your portfolio's performance to a certain benchmark, the S&P 500 provides a more accurate representation of the stock market as a whole.

The Dow Jones Industrial Average is a price-weighted index that tracks the performance of 30 large, publicly-traded companies in the United States. These companies, known as blue-chip stocks, are industry leaders in sectors such as technology, finance, and healthcare.

The Nasdaq Composite is a broad market index that tracks the performance of approximately 3,500 companies listed on the Nasdaq Stock Exchange. It is one of the largest and most popular stock market indexes available today. Be aware that some market pundits refer to the Nasdaq Composite as simply 'Nasdaq'.

What is the S&P 500 for dummies? ›

The S&P 500 is a broad-based stock market index, consisting of the 500 largest U.S. public companies. The diversity and size of the companies it tracks make the S&P a proxy for the entire stock market. You can use the index as a reference point to gauge performance of other assets.

Nasdaq, an American stock market that handles electronic securities trading around the world. It was developed by the National Association of Securities Dealers (NASD) and is monitored by the Securities and Exchange Commission (SEC). Trading on the Nasdaq stock exchange began in 1971.

The Nasdaq-100 Index (NDX®) defines today's modern-day industrials—comprised of 100 of the largest and most innovative non-financial companies listed on the Nasdaq Stock Market based on market capitalization.

The Nasdaq indexes, associated with the Nasdaq exchange, focus more heavily on tech and other stocks. The S&P 500, with 500 large U.S. companies, offers a more comprehensive market view, weighted by market capitalization.

It manufactures, sells and markets soft drinks including Coca-Cola, other non-alcoholic beverage concentrates and syrups, and alcoholic beverages. Its stock is listed on the New York Stock Exchange and is a component of the DJIA and the S&P 500 and S&P 100 indexes.

Can an S&P 500 index fund investor lose all their money? Anything is possible, of course, but it's highly unlikely. For an S&P 500 investor to lose all of their money, every stock in the 500 company index would have to crash to zero.

They represent different swaths of companies and so have different properties. If we want to gauge the market performance over a specific time period or compare your portfolio's performance to a certain benchmark, the S&P 500 provides a more accurate representation of the stock market as a whole.

Total stock market index funds are only slightly more diversified than S&P 500 index funds. Since both types of indexes are heavily weighted toward large-cap stocks, the performance of the two funds is highly correlated (similar).

Nasdaq has been considered a smaller, company-friendly exchange home to big tech stocks. The NYSE, though, with its NYSE American exchange and now with fees competitive with the once cheaper Nasdaq, is targeting similar firms.