A stock market index tracks how part, or all, of the market is performing by looking at the performance of select, representative stocks. Popular US indices include the NASDAQ Composite, NASDAQ 100, Dow Jones and S&P 500. Popular UK indices include the FTSE 100 and FTSE 250.
You can invest in an index through an index fund, which holds stocks included in the index or seeks to replicate the performance of the index with similar stocks. A good index fund performs similarly to the index it’s attempting to mirror.
What’s the difference between the Nasdaq Composite and the Nasdaq 100?
The Nasdaq Composite includes virtually all of the stocks listed on the Nasdaq stock exchange. In order to be eligible to be part of the index, a stock should be listed exclusively on the Nasdaq market and must be a common stock of a company (so any preferred stocks and ETFs will be excluded). The index is supposed to represent the whole Nasdaq market, rather than the largest companies.
The Nasdaq 100 index is a collection of 100 stocks in a range of sectors, including industrial, technology, retail, telecommunication, biotechnology, healthcare, transport, media and service companies. It specifically does not include banking companies, insurance firms, brokerage firms or mortgage loan companies. These sectors are found in the Nasdaq Financial-100.
Qualification criteria for companies in the Nasdaq 100
Companies included in the Nasdaq 100 index must satisfy the following:
Be listed exclusively on Nasdaq in the Global Select or Global Market tiers
Have been publicly offered on an established US market for at least 3 months
Have an average daily volume of 200,000 stocks
Be current in regards to quarterly and annual reports
Not be in bankruptcy proceedings
Out of all the companies that satisfy this criteria, only the top 100 companies (plus or minus a few) by market capitalization get to be in the index. The list is rebalanced annually, although there are some instances when it’s rebalanced earlier.
The Nasdaq Composite is virtually every stock on the exchange, while the Nasdaq 100 is just a selection of 100 stocks that you can find on the exchange. Naturally, this means that the Nasdaq Composite is a lot larger than the Nasdaq 100 in terms of stock volume and value.
Nasdaq Composite vs Nasdaq 100: Which is worth more?
Again, because the Nasdaq 100 is a mere snippet of the Nasdaq Composite, the Nasdaq Composite is worth a lot more. It’s estimated that the Nasdaq stock exchange is worth $23.46 trillion.
Nasdaq Composite vs Nasdaq 100: Which is more diversified?
Both the Nasdaq Composite and the Nasdaq 100 are heavily weighted towards technology stocks—51.42% and 41% respectively. There aren’t any financial companies in the Nasdaq 100, so you won’t be very diversified if you invest solely in this index. But you could also invest in the Nasdaq Financial-100, which only includes financial companies.
Platforms that let you invest in Nasdaq index stocks
These trading apps allow you to invest in companies listed on the Nasdaq as well as funds/ETFs.
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Finder Score for stock trading platforms
To make comparing even easier we came up with the Finder Score. Trading costs, account fees and features across 10+ stock trading platforms and apps are all weighted and scaled to produce a score out of 10. The higher the score, the better the platform—it's that simple.
If you’re looking for a whole-of-market investment that gets you access to most of the stocks on the Nasdaq, then the Nasdaq Composite is a good option, as it’s composed of more than 2,500 shares. This would be well diversified, although it holds a higher weighting in technology companies.
The Nasdaq 100 would let you invest in a number of companies across all the sectors in the exchange based on their market cap, which gives you high value companies.
Popular stocks in the Nasdaq 100 and Nasdaq Composite
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Company
Apple
Microsoft
Amazon
Tesla
Nvidia
How to invest in the Nasdaq 100 and Nasdaq Composite
Find an NYSE or Nasdaq ETF, index fund or mutual fund. Some index funds track the performance of all stocks on the index, whereas others only track a certain number of stocks or are weighted towards specific stocks. You should select the fund that best suits your investment goals.
Open a stock trading account. To invest in ETFs or mutual funds, you’ll need to open a trading account with a broker or trading platform. Keep in mind that some index funds may only be available on certain brokerages or platforms. The providers in our comparison table let you invest in US stocks. Some of the index funds above are listed on the Toronto Stock Exchange (TSX).
Deposit funds. You’ll need to deposit funds into your account to begin trading. You may need to pay a foreign conversion fee to convert your Canadian dollars into US dollars, so you can buy US stocks.
Buy the index fund. Once your money has been deposited, you can buy the index fund. Most ETFs or index funds come with a small annual fee to cover fund management expenses.
Bottom line
There are several indices that track stocks on the Nasdaq including the Nasdaq Composite and the Nasdaq 100. These are designed to give you some insight into how a particular market is performing, with the Nasdaq 100 focusing solely on companies that aren’t in the financial industry. You can invest in both of these indices with index funds. Nasdaq Composite funds exist but are harder to come by.
Consider diversifying your investments by exploring stocks in multiple sectors and funds that track indices in other countries.
QQQ is an exchange-traded fund that’s virtually identical to the Nasdaq 100. It’s designed to reap the same results as the Nasdaq 100 in 1 simple investment.
The Nasdaq Composite is more diversified, holds more stocks and is higher in value than the Nasdaq 100. The Nasdaq 100 is more concentrated, with around 100 stocks, none of which are from the financial sector.
Important information: Powered by Finder.com. This information is general in nature and is no substitute for professional advice. It does not take into account your personal situation. This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for most investors. You do not own or have any interest in the underlying asset. Capital is at risk, including the risk of losing more than the amount originally put in, market volatility and liquidity risks. Past performance is no guarantee of future results. Tax on profits may apply. Consider the Product Disclosure Statement and Target Market Determination for the product on the provider's website. Consider your own circumstances, including whether you can afford to take the high risk of losing your money and possess the relevant experience and knowledge. We recommend that you obtain independent advice from a suitably licensed financial advisor before making any trades.
Zoe was a senior writer at Finder specialising in investment and banking, and during this time, she joined the Women in FinTech Powerlist 2022. She is currently a senior money writer at Be Clever With Your Cash. Zoe has a BA in English literature and a Diploma for Financial Advisers. She has several years of experience in writing about all things personal finance. Zoe has a particular love for spreadsheets, having also worked as a management accountant. In her spare time, you’ll find Zoe skating at her local ice rink.
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