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Beacon Equity Research

Nasdaq Composite Index

Overview

The Nasdaq Composite is a broad market index that encompasses about 4,000 issues traded on the Nasdaq National Market. The index first started in February of 1971 with a base value of 100.00. Though it is not as actively traded as its much smaller cousin, the Nasdaq 100, this index is more commonly referred to by investors and the financial press. When the question "How did the Nasdaq do today?" is asked, the answer is usually the value of this index.

Composition

The Nasdaq Composite Index is comprised of virtually every firm that trades on the exchange. The index is calculated based on a market cap weighting, meaning that the largest firms have the greatest impact on the index's value. The top 10 stocks in the index account for greater than 30% of the Nasdaq Composite's value--a truly remarkable statistic given that the index contains roughly 4,000 firms. Microsoft (MSFT) alone comprises about 9% of the index.

The table below lists all current Nasdaq Composite Index components along with their weighting in the index:
CompanyTickerWeight (%)
MicrosoftMSFT9.0%
IntelIntel5.9%
Cisco SystemsCSCO5.4%
DellDELL2.9%
AmgenAMGN2.5%
OracleORCL2.1%
QualcommQCOM1.8%
eBayEBAY1.5%
ComcastCMCSA1.3%
Applied MaterialsAMAT1.2%
This table lists the Nasdaq Composite Index sectors along with their percentage of the index:
Sector% of Index
Comp. Software/Hardware52.1%
Healthcare13.6%
Financials11.0%
Consumer Discretionary8.5%
Industrials5.5%
Telecommunications5.2%
Consumer Staples1.5%
Materials1.0%
Energy and Utilities0.6%
Other1.1%

Positives

The Nasdaq Composite is one of the premier indices in the world. Because technology firms account for roughly 2/3 of the index, investors often use the Nasdaq as a guide to help them determine the strength of technology stocks.

Drawbacks

Because this index contains many unproven and speculative companies, it tends to be highly volatile relative to the other major indices. In addition, given that it represents such a small portion of the overall market, investors cannot use it to infer how the overall economy is faring.