Loading the player...
A:

Because of the way people throw around the words "Dow" and "Nasdaq," both terms have become synonymous with "the market," giving people a hazy idea of what each term actually means. In this question, "the Dow" refers to the famous figure that peppers almost all business news reports: the Dow Jones Industrial Average (DJIA), an important index that many people watch to get an indication of how well the overall stock market is performing. The Dow, or the DJIA, is not exactly the same as Dow Jones and Company, the firm that publishes the Wall Street Journal. However,the editors of the Wall Street Journal are the people who maintain the DJIA, along with other Dow Jones indices. The Nasdaq is also a term that can refer to two different things: first, it is the National Association of Securities Dealers Automated Quotations System, which is the first electronic exchange, where investors can buy and sell stock. Second, when you hear people say that the "the Nasdaq is up today," they are referring to the Nasdaq Composite Index, which, like the DJIA, is a statistical measure of a portion of the market.

Both the Dow and the Nasdaq, then, refer to an index, or an average of a bunch of numbers derived from the price movements of certain stocks. The DJIA tracks the performance of 30 different companies that are considered major players in their industries. The Nasdaq Composite, on the other hand, tracks approximately 4,000 stocks, all of which are traded on the Nasdaq exchange. The DJIA is composed mainly of companies found on the NYSE, with only a couple of Nasdaq-listed stocks.

Remember, although both "the Dow" and the "Nasdaq" refer to market indices, only the Nasdaq also refers to an exchange where investors can buy and sell stock. Furthermore, an investor can't trade the Dow or the Nasdaq indexes because they each represent merely a mathematical average that people use to try and make sense of the stock market. You can, however, purchase index funds, which are a kind of mutual fund, or exchange traded funds, which are securities that track the indexes.

RELATED FAQS
  1. Is the Dow Jones a stock exchange?

    Learn about the Dow Jones Industrial Average and its impact. This historically significant index provides a daily snapshot ... Read Answer >>
  2. Is the Dow Jones a public company?

    Find out how the Dow Jones Industrial Average tracks the health of the U.S. economy. This fluctuating number indicates the ... Read Answer >>
  3. Who or what is Dow Jones?

    Dow Jones, or more precisely "Dow Jones & Company", is one of the largest business and financial news companies in the ... Read Answer >>
  4. What does the Dow Jones Industrial Average measure?

    Learn about what the Dow Jones Industrial Average measures and discover the meaning of changes in this important and widely ... Read Answer >>
  5. When can you trade the stocks in the Dow Jones Industrial Average (DJIA)?

    Find out when you can trade shares linked to the Dow Jones Industrial Average during NYSE and Nasdaq trading sessions. Read Answer >>
  6. Can you buy shares in the Dow Jones Industrial Average (DJIA)?

    Invest in the Dow Jones Industrial Average index through index funds or ETFs. Read Answer >>
Related Articles
  1. Investing

    What's The Difference Between The Dow And The Nasdaq?

    The way people throw around the words “Dow” and “Nasdaq” makes them seem synonymous with “the market.” But there are important differences.
  2. Investing

    Giants of Finance: Charles Dow

    Find out how this financial visionary helped everyday people enter the world of finance.
  3. ETFs & Mutual Funds

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
  4. ETFs & Mutual Funds

    The Top 3 ETFs to Track the Dow Jones Industrial Average for 2016

    Learn about exchange-traded funds that track the Dow Jones Industrial Average. Read how compounding impacts the results of inverse and leveraged ETFs.
  5. Markets

    4 Famous Companies Dropped From the Dow Jones

    Learn about some of the largest and most famous companies that have been removed from the Dow Jones Industrial Average (DJIA) over its 119-year history.
  6. Markets

    What if You Had Invested $10,000 at 2008's Low?

    If you had invested $10,000 at the bottom of the financial crisis in 2008, what would your return be?
  7. ETFs & Mutual Funds

    DIA vs. IWL: Comparing ETFs with the Largest U.S. Companies

    Find out how the SPDR Dow Jones Industrial Average ETF compares with the iShares Russell Top 200 as mega-cap exchange-traded funds.
  8. Investing

    Understanding The S&P Dow Jones Indices

    S&P Dow Jones Indices offer more than 830,000 indices, including the S&P 500 and the Dow Jones Industrial Average.
  9. Investing

    Why You Need To Know About S&P Dow Jones Indices

    This Article introduces the S&P Dow Jones Indices (SPDJI), available variant categories and index trading advantages
  10. Trading

    Dow Theory

    Learn about the foundation upon which technical analysis is based.
RELATED TERMS
  1. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average ...
  2. Dow 30

    Commonly referred to as just the "Dow," the Dow 30 was created ...
  3. Dow Jones 65 Composite Average

    A composite index that measures changes within the 65 companies ...
  4. Dow Jones Industrial Average (DJIA) Yield

    The aggregate dividend yield on the 30 stocks that make up the ...
  5. Theoretical Dow Jones Index

    A method of calculating a Dow Jones index (most often the DJIA) ...
  6. Dow Jones U.S. Market Index

    A market-capitalization-weighted index maintained by Dow Jones ...
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center