Index NASDAQ: IXIC - An Overview of the NASDAQ Composite

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Learn about the NASDAQ Composite Index (.IXIC): History, Components, and Significance. Get insights into the US stock market’s tech and growth sectors.

Introduction

The NASDAQ Composite Index is symbolized as indexnasdaq: .IXIC is one of the world’s most widely recognized stock market indexes. It represents the performance of a broad range of stocks listed on the NASDAQ stock exchange, predominantly composed of technology companies but also includes stocks from various other sectors.

This article comprehensively overviews the NASDAQ Composite Index, including its history, calculation methodology, components, and significance.

Table of Contents

What Is the History and Background of the NASDAQ Composite Index?

The NASDAQ Composite Index was established on February 5, 1971, by the National Association of Securities Dealers (NASD) to provide investors with a benchmark for tracking the performance of technology-related stocks.

Initially, the index started with a base level of 100 and included approximately 50 securities. Over the years, it has evolved and expanded to include more stocks across different sectors, becoming a vital indicator of the overall performance of the US stock market.

What’s the Calculation Methodology of this Index?

The NASDAQ Composite Index is market-capitalization-weighted, meaning that the weight of each stock in the index is determined by its market capitalization—the total value of a company’s outstanding shares.

The index is calculated using a modified capitalization-weighted methodology, where each stock’s weight is capped at a maximum of 25% to prevent excessive influence from any individual component. This methodology ensures that the index remains diversified and reflects the broader market.

Components of the This Stock Giant

It includes stocks from various sectors, significantly emphasizing technology-related companies. Major giants in the Technological industry, such as Apple, Microsoft, Amazon.com, Alphabet Inc. (GOOGL), and Facebook, Inc. (FB), are among the most significant constituents of the index.

The index encompasses more stocks from healthcare, consumer discretionary, industrials, and more. Up to September 2021, the NASDAQ Composite Index comprised more than 3,500 individual stocks.

Significance and Impact of the Index Role in the US Market

The Index is essential for the technology and growth sectors of the US stock market. The high concentration of technology businesses in the index frequently indicates the attitude of investors towards innovation, game-changing innovations, and business developments related to the technology industry.

Market players, including institutional investors, traders, and analysts, keep a close eye on the index’s performance because they use it to gauge the overall health and direction of the technology and larger stock market.

Performance and Notable Milestones

The NASDAQ has achieved significant milestones and seen extraordinary growth throughout time. The index increased significantly during the dot-com boom of the late 1990s, hitting a record high of 9,838.37 on March 10, 2000.

When the dot-com bubble burst, it likewise saw a significant collapse, losing more than 78% of its value by October 2002. The index has since recovered and climbed to new highs, topping 10,000 in June 2020 and continuing to rise in the following years.

ETFs and Derivatives

Exchange-traded funds (ETFs), index futures, and options are some alternatives available to investors interested in acquiring exposure to the NASDAQ Composite Index. Investors may invest in a diverse portfolio of the firms the index represents thanks to the several ETFs that reflect the index’s performance.

For traders looking for derivative products to hedge or speculatively bet on the index’s future price changes, index futures and options contracts based on the NASDAQ Composite Index are also offered.

Conclusion

The symbol for the NASDAQ Composite Index is.IXIC is a popular stock market index that includes various firms listed on the NASDAQ stock exchange. It is a crucial gauge of how the US stock market’s technology and growth sectors are doing.

The index offers investors and market players valuable insights into the general health and trends of the stock market thanks to its computation technique, which includes a modified market capitalization weighting strategy.