NASDAQ Composite

What Is the NASDAQ Composite?

The NASDAQ Composite is a stock market index that includes every common stock listed on the Nasdaq exchange. As one of the most widely followed indexes in the global financial world, it’s especially known for representing technology, innovation, and fast-growing companies .

It also serves as a key indicator of how well the Nasdaq — and the tech sector in general — is performing.

What Does It Include?

This index tracks more than 3,000 publicly traded companies , making it one of the broadest market benchmarks. While it's best known for featuring tech and internet-based firms , it also includes businesses from other sectors such as healthcare, biotechnology, retail, and finance .

Despite its wide reach, the NASDAQ Composite is often seen as the go-to barometer for the health of the technology industry.

A Quick Look at Its History

The NASDAQ Composite was launched on February 5, 1971 , starting with a base value of 100 . Since then, it has become a major benchmark for growth-oriented and tech-driven companies, capturing the rise of the digital economy during the late 1990s dot-com boom and beyond.

Why Is It Important?

There are several reasons why investors and analysts pay close attention to this index:

• Tech Sector Focus : It gives a strong read on the performance of the tech and innovation-driven parts of the economy, which play a big role in shaping modern markets.
• Market Benchmark : Investors use it to compare individual stock performance and assess the overall condition of the market.
• Economic Signal : Because it covers so many different industries, it reflects shifts in investor confidence and broader economic trends.

How Is It Calculated?

The NASDAQ Composite uses a market-cap-weighted method. This means each company’s influence on the index depends on its total market value — calculated by multiplying its stock price by the number of shares outstanding.

Larger companies (like Apple or Microsoft) have a bigger impact on the index because their movements affect the overall value more significantly.

To calculate the index:

• Add up the total market capitalization of all included stocks.
• Divide that number by a special figure called a divisor , which helps maintain consistency even when companies are added, removed, or undergo changes like stock splits.

This method ensures that big moves in large-cap stocks have a stronger effect on the index than smaller ones.

Some Major Companies Included in the Index

The NASDAQ Composite contains a wide variety of firms, but some of the most well-known include:

• Apple Inc.
• Amazon.com Inc.
• Alphabet Inc. (Google’s parent company)
• Microsoft Corporation

These top-tier companies often drive much of the index’s movement due to their size and market influence.

How Can You Invest in the NASDAQ Composite?

You can’t invest directly in the index itself, but there are several ways to gain exposure:

• Exchange-Traded Funds (ETFs) : These funds mirror the performance of the index. One of the most popular is the Invesco QQQ Trust , which follows the NASDAQ-100 — an index made up of the 100 largest non-financial companies on the Nasdaq.
• Index Futures : Traders can buy or sell futures contracts based on the NASDAQ Composite. These are traded on the Chicago Mercantile Exchange (CME) and allow investors to bet on future price movements.
• Options : Investors can also trade options linked to the index or its ETFs. These give you the right — but not the obligation — to buy or sell the index or ETF at a set price before a specific date.

In Summary

The NASDAQ Composite offers a comprehensive snapshot of the Nasdaq market and is particularly useful for tracking the performance of technology and growth companies . Whether you're using it as a benchmark or investing through ETFs, futures, or options, understanding the NASDAQ Composite can help you make smarter investment decisions.