NASDAQ Index: Benefits, Listing and How to Invest

The term stock exchange, or Borsa Valori, refers to a regulated market where stocks, bonds, currencies, cryptocurrencies, commodities and other financial instruments admitted to listing are traded and negotiated according to the law of supply and demand. The market within these exchanges is divided into buyers, those who, through money, purchase securities, and sellers, those who aim to obtain money and value in exchange for the instruments they offer. Among the most important stock exchanges we find the Nasdaq, American stock exchange in New York, a virtual place where assets of various kinds are bought and sold through different instruments. Within this exchange we find two fundamental indices in the global economy: the Nasdaq Composite and the Nasdaq 100. 

What is the NASDAQ

The Nasdaq is one of the most famous stock exchanges on a global level. It is a stock exchange based in the United States that focuses especially on the technology sector and some of the best companies that this sector offers. The operator and owner of this exchange is Nasdaq Inc, a multinational services company based in the city of New York. It is often taken as an indicator of the trend of the world market and its health especially in the technology sector. We find in its list almost all the current tech giants such as Apple, Amazon, Alphabet, Meta and Microsoft.

The History

Nasdaq is an acronym that stands for National Association of Securities Dealers Automated Quotation. It was born in 1971, more precisely on February 8 in the iconic Wall Street. It was the first fully electronic stock exchange in the world and therefore, in its early days, it was one of the most transparent and efficient exchanges on the global scene. This exchange was the first one that in 1987 eliminated telephone orders and decided for a total telematic transmission that eliminated the difficulties of managing the numerous incoming orders.

The Main NASDAQ Indices: the Nasdaq Composite and the Nasdaq 100

The Nasdaq has several indices that replicate its performance. Indices, also called stock baskets or stock market indices, are groupings of stocks or markets that are used to represent in a single data point an objective summary of the value of the stocks included within them.

The index that summarizes the fluctuation of the price and value of this stock exchange is called Nasdaq Composite. This index includes most of the stocks listed on the Nasdaq and therefore represents an almost perfect replica of the stock exchange in its entirety.

The second most important index is the Nasdaq 100, one of the most important stocks by total capitalization. We find in this basket 100 of the major non-financial companies listed on the Nasdaq.

To give an idea of the seriousness and economic weight of the companies present in the list of a stock exchange like Nasdaq we see the main entry requirements. The 4 main ones are:

an exclusive listing

  • You must not be a financial company
  • You must have at least 200,000 trades of securities per day
  • hold an average capitalization greater than 0.1% of the average of the securities in the index
  • These requirements make it an index frequented by extremely large and solid companies with a firm rooting in the market. We find among the major biggies in their range of companies: CostCo, PepsiCo, Cisco, Comcast, Intel, Apple, Microsoft, Amazon, Meta, Alphabet. It is clear that investing in such a capitalized, controlled and broad index could be beneficial and could be a long lasting investment with vast growth prospects over the years.

NASDAQ quotation

Even though we are looking at one of the largest stock market indices in the world, it is necessary not to make any rash choices. In sectors such as technology, price fluctuations are the order of the day. A security flaw in a software can cause an entire company to lose many points in a matter of days or even hours. However, the fact remains that the Nasdaq is one of the best American and global stock exchanges. This does not exclude the fact that it is vital to make a thorough analysis of the charts, price and historical performance.

Investing through indices allows great levels of diversification and largely lowers the risks of sudden loss. The index has exceeded the threshold of 15,000 in August 2021, however, it is necessary to remain in a state of alert because enormous technological changes are taking place in our era, large companies could be protagonists but also victims.

How to Invest

Investing in the American index is simple. There are mainly two methods. The first consists of relying on a traditional bank that will have high management costs and commissions. The second method is to sign up and operate through an online broker. Often these brokers offer a wide range of tradable products at competitive commissions.

Among the various choices there is eToro, a platform with millions of members, with a constantly updated blog and an always active community. eToro, offers commissions among the lowest in circulation and a graphical interface on PC or mobile app intuitive and user-friendly. eToro does not compromise on security, in fact, is regulated by Cysec: body of the European Union.

Final Considerations: Benefits and Risks

The access requirements to such a prestigious index make every company that manages to be part of it interesting. Investing in individual shares of the Nasdaq or Nasdaq Composite Index or 100 must always be done consciously and in a reasoned manner. The stocks present in this American index could become an interesting source of profit for every investor who will be able to read the upcoming fluctuations and new trends with attention and caution.

However, risks are just around the corner in a market in constant turmoil like the technology one. Microchip crises, new software, bubbles or other unpredictable events could drive our investments up or down in no time.

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