The Nasdaq-100 Index (NDX®), often referred to as the “Nasdaq” or “Nasdaq 100 Index,” is a stock market index that includes the 100 largest non-financial companies listed on the NASDAQ stock exchange.
The index is a popular benchmark for the technology sector and includes industry leaders such as Apple, Amazon, Microsoft, and Alphabet (Google’s parent company).
Background
Launched on February 1, 1985, the NASDAQ 100 was created to track the performance of the largest and most actively traded non-financial stocks listed on the NASDAQ stock exchange.
The index has since evolved into a representation of the technology and innovation sectors, with a strong focus on companies in areas such as software, biotechnology, and internet services.
Calculation Method
The NASDAQ 100 is a market capitalization-weighted index, meaning that the index’s value is determined by the market value of its constituent companies’ outstanding shares.
Companies with a larger market capitalization have a more significant impact on the index’s performance.
The index is calculated throughout the trading day and is updated every second.
Importance of the NASDAQ 100
The NASDAQ 100 is important for several reasons:
- Market Benchmark: As a benchmark for the technology sector, the NASDAQ 100 allows investors to gauge the overall performance of the industry’s leading companies.
- Economic Indicator: The index reflects the health of the technology and innovation sectors, which are crucial drivers of economic growth in the modern era.
- Investment Performance: Many investment funds and portfolios use the NASDAQ 100 as a benchmark to measure their performance, aiming to outperform the index over time.
- Passive Investing: The popularity of the NASDAQ 100 has led to the creation of index-tracking investment products such as exchange-traded funds (ETFs) and index funds, which allow investors to gain exposure to the performance of the index without purchasing individual stocks.
For investors, the NASDAQ 100 offers a way to invest in the most prominent technology and innovation companies with a single investment product.
By investing in an index-tracking product that replicates the NASDAQ 100, investors can achieve a broad exposure to these sectors and reduce the risks associated with individual stock selection.
The NASDAQ 100’s real-time pricing and liquidity also make it an attractive option for both long-term investors and short-term traders.
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