The Nasdaq index vs Dow Jones is two of the most widely-followed stock market indices in the world. While they both provide valuable insights into the overall performance of the stock market, there are some important differences between them. In this blog post, we’ll take a look at the history and makeup of both indices, compare their recent performance, and discuss how investors can create a strategy for tracking them.
Understanding the Nasdaq and Dow Jones Indices.
The Nasdaq Stock Market began in 1971 as the world’s first electronic stock market. The Nasdaq is home to many of the largest technology companies in the world, such as Apple, Microsoft, and Amazon. The Dow Jones Industrial Average is one of the oldest and most well-known stock market indices in existence. It was created in 1896 and comprises 30 large publicly traded companies, including Vested, Boeing, Coca-Cola, and IBM.
Differences in Makeup and Methodology.
The makeup of the two indices is quite different. The Nasdaq index is comprised mostly of tech companies while the Dow Jones includes a mix of industrial, financial, and consumer goods stocks. The Nasdaq is also a much younger index than the Dow Jones. Another key difference is that the Nasdaq is a market value-weighted index while the Dow Jones is price-weighted. This means that stocks with a higher price per share have a greater impact on the Dow Jones index than on the Nasdaq.
Pros and Cons of Each Index.
Each index has its own advantages and disadvantages. The Nasdaq has been outperforming the Dow Jones in recent years due to strong growth in tech stocks. However, because it contains fewer stocks overall, it can be more volatile than the Dow Jones. The Dow Jones may not be growing as quickly as the Nasdaq but it is generally seen as being more stable due to its diversified mix of stocks from different sectors.