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The Dow vs. the Nasdaq: What’s the Difference?

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By THE INVESTOPEDIA TEAM  Reviewed by SOMER ANDERSON  Updated Feb 3, 2021TABLE OF CONTENTSEXPAND

The Dow vs. the Nasdaq: An Overview

Because of the way people frequently use the phrases “the Dow” and “the Nasdaq,” in some instances both of these terms have become synonymous with “the market” or “the economy.” However, this can provide an inaccurate impression of what these terms actually refer to. While both the Dow and the Nasdaq are indexes that investors can track, neither of these indexes actually refers to the market or the economy in general. Instead, they are theoretical snapshots of the market that can provide investors with an idea of how the market or the economy is performing.

KEY TAKEAWAYS

  • Both “the Dow” and “the Nasdaq” refer to market indexes.
  • The Nasdaq also refers to an exchange where investors can buy and sell stocks.
  • Although it can be misleading based on how the terms are frequently used, neither the Dow nor the Nasdaq refers to “the market” or “the economy.”
  • Investors cannot trade the Dow or the Nasdaq indexes because they are representations of the performance of a grouping of stocks in the form of a mathematical average.
  • However, investors can purchase index funds–or exchange-traded funds (ETFs)–that track these indexes.

What’s The Difference Between The Dow And The Nasdaq?

The Dow

“The Dow” actually refers to the Dow Jones Industrial Average (DJIA), an important index that many people pay attention to in order to get an indication of how well the overall stock market is performing. The DJIA is not the same as Dow Jones and Company, a firm that is owned by News Corp. and publishes the periodical called The Wall Street Journal.

Rather, the index is one of many indexes owned by S&P Dow Jones Indices LLC, a joint venture of S&P Global (SPGI), CME Group Inc., and News Corp.1

The DJIA is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the Nasdaq. The DJIA was invented by Charles Dow in 1896. It measures the performance of some of the United States’ biggest blue chip companies. The industrial part of the name is largely historical; very few of the index’s component companies have anything to do with heavy industry anymore.2

The Nasdaq

The Nasdaq is also a term that can refer to two different things. The first is the National Association of Securities Dealers Automated Quotations exchange which is the first electronic exchange that allowed investors to buy and sell stock on a computerized, speedy, and transparent system without the need for a physical trading floor.3 The second reference is to an index. When you hear people say that the “the Nasdaq is up today,” they are referring to the Nasdaq Composite Index, which, like the DJIA, is a statistical measure of a portion of the stock market.4

Both the Dow and the Nasdaq, then, are terms that refer to an index, or an average of a great many numbers derived from the price movements of certain stocks. The Nasdaq contains all of the companies that trade on the Nasdaq. Most are technology and internet-related, but there are financial, consumer, biotech, and industrial companies as well. The Nasdaq tracks more than 3,300 stocks. The DJIA is composed mainly of companies found on the New York Stock Exchange, with only a couple of Nasdaq-listed stocks such as Apple (AAPL), Intel (INTC), Cisco (CSCO), and Microsoft (MSFT).SPONSORED

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INDEX TRADING STRATEGY & EDUCATIONWho or What Is Dow Jones?INDEX TRADING STRATEGY & EDUCATIONHow Does the Dow Jones Work?STOCK MARKETSAn Introduction to U.S. Stock Market IndexesSTOCK TRADING STRATEGY & EDUCATIONKey Indicators for Following the Stock Market and EconomyMACROECONOMICSHow to Measure the Total Stock MarketINVESTING ESSENTIALSWhat the Dow Means and How It Is Calculated

ConstituentA constituent is a single stock or company that is part of a larger index such as the S&P 500 or Dow Jones Industrial Average. moreDow Jones Industrial Average (DJIA) DefinitionThe Dow Jones Industrial Average (DJIA) is a popular stock market index that tracks 30 U.S. blue-chip stocks. moreMarket Is Up DefinitionThe phrase market is up means the stock, bond, or commodity market currently trades higher than it did at some specific point in the past. moreHow Wall Street’s Name and History Remain Relevant TodayWall Street is in lower Manhattan and home to the New York Stock Exchange (NYSE). Wall Street is an umbrella term describing the financial markets. moreBellwether StockA bellwether stock is believed to be a leading indicator of the direction of the economy or the market as a whole. Learn more about these stocks and how they work. moreRussell 1000 IndexThe Russell 1000 Index, a subset of the Russell 3000 Index, represents the 1000 top companies by market capitalization in the Unites States. more

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Published by technofiend1

Kazan- Kazan National Research Technical University Казанский национальный исследовательский технический университет имени А. Н. Туполева he graduated in Economics in 1982

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