If you want to know how the stock market as a whole is performing, referring to stock market indexes could help paint the picture. There are 3 main indexes in the US: The S&P 500®,1 the Dow Jones Industrial Average,2 and the Nasdaq Composite.3 The last tracks stocks traded on the Nasdaq stock exchange, which tends to go heavy on the technology sector. Here’s more about the Nasdaq stock exchange and composite index.

What is the Nasdaq?

The Nasdaq is a stock exchange, aka a marketplace where investors can buy and sell shares of publicly traded companies. The Nasdaq was the first electronic exchange, making it possible for investors to get in on the action without physically being on the trading floor. Today, the Nasdaq exchange, located in New York City, is the second-largest stock exchange in the world by market capitalization, or the value of a company’s total outstanding stock. Only the New York Stock Exchange (NYSE), also in New York City, is larger.

Nasdaq may also refer to the Nasdaq Composite, an index—a group of investments often bundled together because they have something in common—that includes thousands of stocks, which are all listed on the Nasdaq stock exchange. The Nasdaq Composite also features some of the biggest tech companies in the country.

What does Nasdaq stand for?

Nasdaq, which was founded in the early 1970s, originally stood for the National Association of Securities Dealers Automated Quotations. Now the organization simply goes by Nasdaq.

Nasdaq vs. NYSE

The New York Stock Exchange (NYSE) is the world’s largest stock exchange by market cap and has been around since 1792. For most of its history, the NYSE operated as an in-person exchange and still has a physical location on Wall Street in downtown Manhattan. However, the NYSE has also moved to online trading.

Both the Nasdaq exchange and the NYSE are popular markets for companies and investors. The Nasdaq tends to draw large companies from the technology sector, as well as the consumer goods and health care industries. The NYSE features companies of all sizes. That includes younger, growth-oriented businesses and established blue-chip companies.

What time does the Nasdaq open and close?

The Nasdaq exchange opens for the week on Mondays at 9:30 a.m. ET. It closes each weekday at 4:00 p.m. ET and closes for the week on Friday. Even though it is an electronic marketplace, it keeps standard stock market hours (just like in-person exchanges). It also offers extended hours trading from 4:00 a.m. ET to 9:30 a.m. ET and 4:00 p.m. ET to 8:00 p.m. ET on weekdays. Some brokers allow their clients to trade during these extended hours, but not all do. The Nasdaq exchange is closed for stock market holidays like New Year’s Day and Thanksgiving.

What is the Nasdaq Composite Index?

The Nasdaq Composite Index tracks the value of most stocks that are traded on the Nasdaq market. It distills the average performance of these many stocks into one number. The index’s value increases when the majority of stocks on the Nasdaq go up, and it goes down when the majority of stocks decline. This gives investors a quick way to see how companies on the Nasdaq exchange are doing overall.

How does the Nasdaq work?

The Nasdaq market index isn’t an equal average of every single stock. Instead, the Nasdaq uses a market capitalization weighting system. Market capitalization is found by multiplying the current market price by the number of total outstanding stock shares. The Nasdaq Composite calculates its value by giving more weight to companies with higher market caps, and less to smaller-cap companies listed on the exchange. That means companies with the largest market cap affect the index most.

How many companies are in the Nasdaq?

There are more than 3,000 companies publicly traded on the Nasdaq stock exchange. To be part of the Nasdaq Composite Index, a company must be exclusively listed on the Nasdaq market, so some companies are left out of the index.

The companies range from Magnificent 7 tech giants like Apple and Meta to smaller companies like 1-800-Flowers.com. While the Nasdaq includes companies from all industries, tech is by far the most represented sector.

What is the Nasdaq 100?

The Nasdaq 100 is another market index that’s a subsection of the Nasdaq Composite. It tracks 100 of the largest, nonfinancial companies on the Nasdaq exchange based on market capitalization. This index gives investors a way to follow the performance of some of the biggest players in technology, health care, and other sectors.

Why is the Nasdaq important?

The Nasdaq is important because it is the second-largest stock exchange in the world with many of the most popular and valuable US stocks listed and traded through the Nasdaq market. Meanwhile, the Nasdaq Composite Index is a key benchmark for the technology sector since so many major tech companies are part of this index.

Historical performance of the Nasdaq

Between 2015 and 2025, the Nasdaq Composite saw an average annualized return of about 15%.4 The S&P 500, another market index including stocks from large US companies, had an average annualized return of about 14% for the same time period.5 The S&P 500 includes stocks from a more balanced mix of industries versus the tech-heavy Nasdaq.

How to invest in the Nasdaq companies

You cannot buy shares of the Nasdaq Composite Index directly, but there are still ways to invest in the companies that make up the index. Here are the steps to take to invest in companies in the Nasdaq Composite Index.

1. If you don’t already have an investment account, like a retirement account or a taxable brokerage account, open one. Here’s how to pick your broker if you aren’t already investing and how to open a brokerage account.

2. Move money into the account by connecting an account like a bank account to the investment account and then making a transfer.

3. Decide how you’d like to invest in these companies. You could choose an index fund, which could be an exchange-traded fund (ETF) or mutual fund, that seeks to match the Nasdaq Composite’s performance. This saves you from having to buy thousands of stocks listed on the Nasdaq yourself, though that’s an option too. Or you could go the direct indexing route: buying a representative amount of all of the index’s components individually. You could also invest in funds based on subsections of the Nasdaq, like the Nasdaq 100.

4. Buy your investments. Be sure to check on how they’re performing regularly, at least once a year. Following good investment management practices could help keep your overall portfolio healthy.