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 that consists 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, as an index, is a statistical measure of the performance of America's 500 largest stocks. In this context, the S&P 500 is a common benchmark against which portfolio performance can be evaluated.

What Is the Nasdaq Composite Index?

Q: What is the Nasdaq Composite Index?

The Nasdaq Composite is a stock market index that consists of the stocks that are 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 included in the Nasdaq Composite and why the number of stocks in the index often changes. The index is designed to be representative of the entire Nasdaq stock market, not just the largest companies.

By Matthew Frankel, CFP – Updated Sep 29, 2025 at 3:57 PM EST | Fact-checked by Parker Hicks

Key Points

Nasdaq Composite includes only Nasdaq-listed common stocks, excluding ETFs and preferred stocks.
It is market-cap weighted, meaning larger companies have more influence on index performance.
Investing via Nasdaq index funds offers broad tech sector exposure with streamlined management.

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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 big difference that's important to note.

Instead of including all of the common stocks listed on the Nasdaq exchange, the Nasdaq-100 only includes the stocks of the 100 largest nonfinancial companies listed. 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 like with the Nasdaq Composite, there are mutual fund and ETF products that allow investors to track the Nasdaq-100 Index in their portfolio. Most notable is the Invesco QQQ ETF (QQQ -1.04%), which proportionally invests in the 100 index components for a low expense ratio of 0.2%.

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Nasdaq FAQs

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. 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, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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Matt Frankel 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 and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.