The Nasdaq Composite Index

In some senses, the Nasdaq Composite Index is sometimes
seen as a competitor to the S&P, but the Nasdaq Composite
is actually very different. For starters, Nasdaq measures the
stock performance of 5,500 companies, nearly half of them
in the telecommunications and high-tech arena, and all of
them found in the Nasdaq market.

The index includes companies
such as Apple, Intel, MCI Communications, Cisco,
Oracle, Sun Microsystems, and Netscape.

As a result, the Nasdaq index is a good deal more volatile
than, for example, the Dow Jones Industrial Average and,
perhaps, the stock market at large. It’s also home to some of
the bigger success stories of the 1990s — many of which are
technology firms. The higher the potential for return an
investment has, the more the risk it carries.

Just like the Dow Industrial Average and the S&P
500, the
Nasdaq Composite gives the average performance of the
stocks in the index both as numbers and percentages. If Nasdaq
goes up, your newspaper might report that “Nasdaq was
up 1 point or 3% today.”

Although it will be increasingly important for investors to
watch the Nasdaq Composite in the days ahead and the performance
of some of its key stocks, it’s equally important to
look at Nasdaq in relation to the S&P 500 — and even the
Dow — to get an overall sense of how the stock market is
doing. For example, if you are a short-term trader (day trader)
then the Nasdaq is where you want to be. The Nasdaq stocks
can offer great potential for profit and, unfortunately, for loss,
as well.