What is the Nasdaq Composite Index?

The Nasdaq Composite is a stock market index composed of the stocks listed on the Nasdaq stock exchange. To be included in the index:The stock must be a common stock of an individual company, so preferred stocks, exchange-traded funds (ETFs), and other types of securities are excluded.American depositary receipts (ADRs), real estate investment trusts (REITs), and shares of limited partnerships are eligible, however.The stock must have a specific number of both outstanding shares and shareholders.That's why there are so many stocks in the Nasdaq Composite and why the index's composition often changes. The index is designed to be representative of the entire Nasdaq Stock Market, not just the largest companies.

What are stock market indexes?

A stock market index shows how investors feel an economy is faring. An index collects data from a variety of companies across industries. Together, that data forms a picture that helps investors compare current price levels with past prices to calculate market performance.

The S&P 500 (also known as the Standard & Poor's 500), a registered trademark of the joint venture S&P Dow Jones indexes, is a stock index composed of the 500 largest companies in the U.S. It is generally considered the best indicator of how U.S. stocks are performing overall. From another angle, the S&P 500 is an index that measures the performance of America's 500 largest stocks. In this context, the S&P 500 is a common benchmark for evaluating portfolio performance.

Your Complete Guide to the Nasdaq Composite Index

By Matthew Frankel, CFP – Updated May 6, 2026 at 11:20 AM EST | Fact-checked by Parker Hicks

Key Points

Nasdaq Composite includes only common stocks, excluding ETFs and preferred stocks.
It's market-cap-weighted, meaning larger companies influence it more.
Investing in Nasdaq Composite can be done via index funds like Fidelity’s Nasdaq Composite ETF.

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An infographic showing why stocks are included — or not included — in the Nasdaq composite index. — Image source: The Motley Fool.

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Exchange-Traded Fund (ETF)

An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.

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Financial Securities

A tradeable asset that holds monetary value.

Nasdaq-100: The other Nasdaq stock index

There's another Nasdaq-based index that is widely followed: The Nasdaq-100. This index, which is also market-cap-weighted, is often confused with the Nasdaq Composite, but there's a key difference to note.

Instead of including all common stocks listed on the Nasdaq exchange, the Nasdaq-100 only includes the 100 largest nonfinancial companies listed on the exchange. The 100 companies in the Nasdaq-100 make up more than 90% of the weight of the Nasdaq Composite Index. As you might imagine, the top 10 holdings of both indexes look very similar, as do their performance over time.

Just as with the Nasdaq Composite, there are mutual funds and ETFs that allow investors to track the Nasdaq-100 Index in their portfolios. Most notable is the Invesco QQQ ETF (QQQ +0.41%), which proportionally invests in the 100 index components for a low expense ratio of 0.2%.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

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@MattFrankelCFP

Matt Frankel, CFP has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Your Complete Guide to the Nasdaq Composite Index

Key Points

Exchange-Traded Fund (ETF)

Financial Securities

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Nasdaq-100: The other Nasdaq stock index