The S&P 500 and NASDAQ indices are popular US stock market indices that list stocks across various sectors that investors can track. They are large cap-heavy indices where similar names appear in the top holdings. However, there are significant differences between NASDAQ and S&P 500. S&P 500 is one of the oldest stock market index in the US. In contrast, NASDAQ is a stock exchange comprising three indices. Here we summarise Nasdaq vs S&P 500 for easy understanding.
What is NASDAQ?
The NASDAQ is the American stock exchange. This was the first electronic stock exchange founded in 1971 to enable investors to buy and sell stocks quickly.
NASDAQ is the world’s second-largest stock exchange in terms of securities value. It has more than 3,300 companies listed on the NASDAQ stock exchange. Today, this exchange is the global electronic marketplace where the world’s largest technology companies are listed, like Amazon, Apple, etc. Furthermore, the NASDAQ stock exchange comprises three stock indices: NASDAQ Composite, NASDAQ 100 and NASDAQ Financial 100.
What is S&P 500?
S&P 500 is the oldest index in the US which was launched in 1957. It stands for Standard & Poor 500. This index comprises the top 500 largest companies in the US, representing 11 sectors. Thus, these companies’ shares mark up to 70% of the total value of the stock market. For instance, if analysts or investors are talking about the stock market’s performance, they refer to the S&P 500 Index. Therefore, S&P 500 is a stock market indicator that measures the health of the US stock market.
Nasdaq vs S&P 500 : Key Differences
The following table summarises Nasdaq vs S&P 500
|Market Capitalisation||$30.55 billion||$35.1 trillion|
|Number of Stocks||More than 3,300 stocks||Top 500 largest publicly owned companies.|
|Diversification||More than 57% of the index includes technology-based companies.||It includes stocks across 11 sectors with no single sector making more than 30% of the index.|
|Based on||Company’s market capitalisation||Market float capitalisation; It means that companies with the largest value of shares are given the highest weightage in the index.|
|Selection Criteria||Simple selection criterion which includes all domestic and international common stocks.||It selects stocks based on the company’s public float, financial viability, liquidity and sector representation.|
|Volatility||More volatile||Less volatile|
|Performance||Largely depends on the technology sector’s performance.||Driven by the largest companies.|
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