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The Nasdaq Composite Index (IXIC) is one of the top three most used indices for tracking the performance of the US economy – alongside the Dow Jones Industrial Average and the S&P 500. Its level is determined by the price movements of all the stocks and common securities listed on the Nasdaq exchange, and as such it has a lot of exposure to technology stocks.
This page will take you through the history of the IXIC, explain how the stocks that are tracked by it are selected, and how you can invest in the performance of the NASDAQ Composite index.
The NASDAQ Composite index began in 1971 with a starting value of 100 index points. In the decades it has been running, the index has seen impressive growth and now functions as one of the key indicators of the US economy. It follows the performance of stocks and securities traded on the Nasdaq exchange in New York, which places an emphasis on information technology companies.
The IXIC saw an impressive period of sustained growth throughout the late 20th century, before falling sharply with the dotcom crash of the early 2000s. This period of growth saw the index peak at 5,132.52 on March 10th 2000, but after the subsequent crash the index wouldn’t pass the 3,000 mark again until the 2010s.
After the first decade of the 21st century – which was characterised by both the dotcom crash and the 2007-08 financial crisis, the IXIC entered a bear market and began to rise significantly. It surpassed the 9,000 mark on the 26th December 2019, but was then to see another sharp crash in early 2020 as a result of the coronavirus pandemic wreaking havoc on global markets.
The stocks and securities tracked by the NASDAQ Composite index must be traded exclusively on the Nasdaq Stock Exchange, and fall within the following types of security:
- American Depositary Receipts (ADRs)
- Common Stock
- Limited Partnership Interests
- Ordinary Shares
- Real Estate Investment Trusts (REITs)
- Shares of Beneficial Interest (SBIs)
- Tracking Stocks
By following the performance of the Nasdaq as a whole, the IXIC is able to function as a valuable indicator of the trading activity on the exchange, and give an insight into the US economy as a whole.
The easiest way to invest in the NASDAQ Composite index is with either an ETF or a mutual fund. Both of these products will allow you to invest in the performance of all stocks and securities listed by the IXIC with only one transaction. Mutual funds are a good option if you’re looking to buy and hold for a long time, but incur relatively high fees and can only be bought or sold at the end of each trading day. ETFs (exchange-traded funds) give investors similar diversification, but also come with the flexibility of being able to be traded on an exchange at any time. If you’re planning on trading in the short term, it’s advisable to use an ETF.