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Introduction to the Nasdaq Composite

The Nasdaq Composite Index is among the top dogs of the US stock market. Along with the S&P 500 and the Dow, the Nasdaq Composite has been dubbed as one of the premiere indices in the world.

The rise of the Nasdaq in the market scene is attributed to the massive success of technological companies over the years. Containing over 3000 companies that trade in the Nasdaq, the Nasdaq Composite is one of the most diverse indices out there. It covers companies in a variety of sectors such as bio-tech, industrial, financial, and consumer staples.

All stocks in the Nasdaq Composite are all the ones that trade in the Nasdaq stock exchange that are not funds, exchange-traded funds (ETFs), preferred shares, debentures, or derivatives. There is a wide array of securities in the index such as common stocks, American Depository Receipts (ADR), tracking stocks, and real estate investment trusts (REITs.)

What separates the Nasdaq Composite from other stock indices is that it  includes a significant portion of foreign stocks with technology stocks leading the pack. This allows for great diversification and greater chances of investing in a company with high growth potential.

However, the number of stocks also spells trouble for the index itself. The magnitude of companies moving makes the stock index highly volatile and risky. Also, the big chunk of the index belonging to technology companies means that the advance and decline of the industry will hurt trades accordingly.

The Nasdaq Composite is a no-brainer in choosing the best indices of the world however be wary of market events that could significantly hurt the index.

Created by : Barbara
Published : 04 Jun 2015

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