The Nasdaq Composite is an index that measures the performance of more than 3,000 securities

The Nasdaq Composite is an index that measures the performance of more than 3,000 securities that are all listed on the Nasdaq stock market. It is an often-cited stock market index along with the S&P 500 and the Dow Jones Industrial Average, but is known for its large number of technology-related companies.

A smaller index, the Nasdaq 100, measures the performance of the 100 largest non-financial companies listed on the Nasdaq exchange based on market capitalization. Nasdaq was originally an acronym for “National Association of Securities Dealers Automated Quotations.”

What types of companies are in the Nasdaq Composite Index?
The Nasdaq Composite is best known for its large number of technology-related components. As of December2022, about half of the index was made up of companies from the tech industry, with well-known names like Apple, Microsoft, Amazon and Google near the top of the list. There are, however, other industries included in the index such as consumer discretionary, which accounts for about 17 percent of the index, and healthcare, which makes up about 10 percent. Even some financial companies are included, such as investment management company T. Rowe Price.

Top 10 stocks that make up the Nasdaq Composite
Below are the 10 largest components of the index and their total weighting:

Apple (AAPL): 12.19 percent
Microsoft (MSFT): 10.54 percent
Amazon (AMZN): 5.05 percent
Alphabet Class C (GOOG): 3.18 percent
Alphabet Class A (GOOGL): 3.11 percent
Tesla (TSLA): 2.29 percent
Nvidia (NVDA): 2.12 percent
Meta Platforms (FB): 1.60 percent
Pepsico (PEP): 1.47 percent
Broadcom (AVGO): 1.34 percent
Note: Data as of December 30, 2022.

What does the Nasdaq Composite measure?
The Nasdaq Composite measures the stock performance of the constituents in the index, which all come from companies listed on the Nasdaq Stock Market. The index is market-cap weighted, which means that companies are weighted in the index based on the value of their outstanding shares. These weightings will change based on the performance of the companies’ share prices. Apple is currently the most valuable company in the world with a market capitalization around $2.5 trillion, and it accounts for roughly 12 percent of the Nasdaq Composite.

The index may also be used by investment managers as a benchmark to measure their funds’ performance against. Funds that focus on the tech industry may use the Nasdaq Composite as a way to compare their relative performance.

How to invest in the Nasdaq Composite Index
Though you can’t invest directly in the Nasdaq Composite index, you can invest in mutual funds and ETFs that aim to track the performance of the index, usually for very low costs. The Fidelity Nasdaq Composite Index ETF (ONEQ), for example, aims to track the index’s performance and comes with an expense ratio of 0.21 percent.

One of the most popular technology-related ETFs is the Invesco QQQ Trust (QQQ), which tracks the performance of the Nasdaq 100 and comes with a 0.20 percent expense ratio. These ETFs and others can easily be purchased through an online stock broker.