The Dow vs. the Nasdaq: An Overview

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The Dow jones vs the Nasdaq: an overview
Because of the way people frequently use the phrases “the Dow “and” the Nasdaq, “in some cases both terms have become synonymous with” the market “or”the economy.”However, this may provide an inaccurate impression of what each of these Terms really refers to. While both the Dow and Nasdaq are indices that investors can track, neither of these indices 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 economy is functioning.

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

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

Rather, the index is one of many indices owned by S&P Dow Jones Indices LLC, a joint venture of S&P Global (SPGI), CME Group Inc.All rights reserved.

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

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

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


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