A:

F

ew stock market indices are as misunderstood as the Nasdaq Composite Index. Due to the burst of the dotcom bubble in 2000 and the ensuing plummet of the Nasdaq, many investors assume that the Nasdaq focuses primarily on tech stocks. However, nothing could be farther from the truth.

The Nasdaq Composite, published by the National Association of Securities Dealers Automated Quotations, is comprised of approximately 3,000 common stocks and other investments that trade on its system. A complete listing of every security traded on the Nasdaq can be found on the official Nasdaq website under "Index Descriptions".

The "other" investments that may be included in the Nasdaq Composite are: American Depository Receipts, which represent companies traded on foreign exchanges, Real Estate Investment Trusts (REITs), and Limited Partnership interests. Since the Nasdaq Composite is composed virtually of every stock that trades on its system, the underlying components of this index can change weekly, or even daily, as new issues come to market and old issues are delisted.

Similar to the S&P 500, the value of the Nasdaq Composite is calculated on a market capitalization-weighted basis. This means that companies with more shares outstanding and/or a higher price per share will contribute to an increasing proportion of the index's return.

This question was answered by Ken Clark.

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