es. Though broad in coverage, the Nasdaq leans towards tech companies. It is also a market. cap-weighted index and therefore most heavily influenced by very large tech companies.
The influence and the population of small, speculative companies in the Nasdaq make the index more volatile than either the Dow or the S&P 500. The Nasdaq wasn’t designed to represent the overall market, but it does provide good insight into the mindset changes of people who invest in technology.
There are a number of other indexes that measure larger or smaller sections of the market. Mutual fund investors can also find funds that track almost any index they want. The major three indexes above, however, will serve most investors well. Should you want to look at other indexes to compare, make sure you have a good idea of how each index is weighted. Most, if not all, will be weighted based on market cap. You should also know how the index selects the stocks it holds.
The Balance does not provide tax, investment, or financial services or advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.