Nasdaq

Nasdaq is a major U.S. exchange known for listing tech and growth companies, also an index of those stocks.

A quick example

Picture this

During a tech boom, the Nasdaq Composite gains 35% while the S&P 500 gains 15% — the composite’s tech weight supercharges the ride. The next year, rates rise and tech falls; the Nasdaq drops 30% while the S&P falls 12%. An investor who saw the Nasdaq as “the market” experiences double the volatility of an investor who held the broad index. The scenario is the price of concentration: higher highs and lower lows.

What it means for you

It is the home turf of the big tech names most retail investors watch.

How to apply it

When you hear a Nasdaq number, know whether it is the exchange or the composite index, and remember the tech concentration cuts both ways. If you want broad U.S. exposure without the sector bet, the S&P 500 is the steadier gauge.

Common mix-ups

Its tech tilt means it can swing more than broader, blunter indexes.

Key takeaway

“Nasdaq” is two things — an exchange and a tech-heavy composite index — and the index amplifies both rallies and crashes. Its technology tilt delivers higher highs in booms and lower lows in downturns, so it is not a broad market proxy. If you want the sector’s upside, accept the extra volatility; if you want broad U.S. exposure, the S&P 500 is the steadier gauge. Know which Nasdaq you mean and what its concentration implies for your risk.

Definitions reviewed by the Investing Glossary editorial team.