The Nasdaq is a US exchange on which stocks are bought and sold, whereas the Dow Jones is an index that tracks 30 major stocks listed on US exchanges. The Nasdaq Composite is an index that tracks most of the stocks listed on the Nasdaq exchange.
Here’s how the Nasdaq index and Dow Jones compare in size, value, diversification and performance.
A stock exchange is an electronic marketplace on which stocks and other securities are traded. An index tracks market performance by tracking the performance of a group of stocks.
Stocks can be tracked in more than one index. An index can group stocks by sector, industry, region or any other characteristic. Think of a stock exchange as Spotify and an index as a playlist.
The Nasdaq Composite — sometimes confusingly called “the Nasdaq” — is a stock market index that tracks most of the stocks listed on the Nasdaq stock exchange.
When people talk about investing in a Nasdaq fund or exchange-traded fund (ETF), they’re likely referring to a fund that holds stocks listed on the Nasdaq Composite. As an index, it’s easier to compare to the Dow Jones.
To be included in the Nasdaq Composite, a stock must be a common stock and listed exclusively on the Nasdaq exchange. Preferred stocks and ETFs are not included. The index is supposed to represent the whole Nasdaq, not just its largest stocks.
The Dow Jones is an index that tracks 30 prominent US companies. It’s weighted by price, which means each stock impacts the index’s performance in proportion to its price. The companies in the Dow Jones are chosen by representation from the Wall Street Journal and S&P Global, which is somewhat subjective.
The Nasdaq index is larger than the Dow Jones by a pretty substantial margin. The Dow Jones tracks only 30 stocks, while the Nasdaq Composite tracks more than 2,500 stocks.
The Nasdaq Composite’s market capitalization is likely close to the Nasdaq stock exchange’s market cap of $23.46 trillion USD. Meanwhile, the Dow Jones has a market capitalization of $10.35 trillion USD.
When you consider that the Dow Jones tracks just 30 stocks and the Nasdaq Composite tracks a couple thousand stocks, you get a sense of how large stocks in the Dow Jones are.
If you invest in a fund that mimics the performance of the Dow Jones index, you’re exposed to the performance of 30 big players on US exchanges. Investing in a fund that mimics the performance of the Nasdaq Composite gives you access to those stocks plus a range of smaller companies. This can be riskier, but there might be an opportunity for greater growth.
The Nasdaq index tracks a lot of technology stocks, with stocks in this sector made up of half of the Nasdaq exchange. It’s spread out across other sectors as well, but technology is the key one. Tech is the largest sector represented in the Dow Jones, with 20% of stocks falling into this sector.
These trading apps allow you to invest in companies within the indices or funds that track these companies.
Compare performance data for popular Dow Jones and Nasdaq funds.
| Icon | Fund | 5-year performance | 1-year performance (to October 2022) |
|---|---|---|---|
 | iShares Dow Jones U.S. ETF (IYY) | 10.85% | -19.38% |
 | SPDR Dow Jones Global Real Esta (SPYJ) | 3.62% | 2.48% |
 | Lyxor Dow Jones Industrial Average (LUX) UCITS ETF (C010) | 10.76% | -12.22% |
| Icon | Fund | 5-year performance | 1-year performance (to October 2022) |
|---|---|---|---|
| iShares NASDAQ 100 Index ETF (CAD-Hedged) (XQQ) | 14.11% | -28.69% |
 | Invesco NASDAQ 100 Index ETF (QQC) | 0.00% | 0.00% |
 | Lyxor Nasdaq-100 UCITS ETF – Ac (LYMS) | N/A | N/A |
 | BetaPro NASDAQ-100 -2x Daily Bear ETF (HQD) | -36.15% | 48.53% |
 | Fidelity NASDAQ Composite Index Fund (FNCMX) | 8.14% | 20.54% |
The Nasdaq Composite index has performed better than the Dow Jones historically, although you shouldn’t take this to mean that it will in the future. It is more diversified and gets you access to blue-chip stocks as well as smaller players in the market. The Dow Jones gets you access to large companies, particularly technology companies.
The Nasdaq index is a well-diversified set of shares alone, although you’d want to add some global diversification by investing in some stocks in other countries.
The Dow Jones could be paired with other index funds or ETFs as it’s only 30 companies and doesn’t offer much diversification.
| Dow Jones | Nasdaq Composite | ||
|---|---|---|---|
 | Apple | | Apple |
 | Microsoft | | Microsoft |
 | Johnson & Johnson |  | Amazon |
 | UnitedHealth |  | Tesla |
 | Visa |  | NVIDIA |
These trading apps allow you to invest in companies within the indices or funds/ETFs that hold stocks in Nasdaq and Dow Jones companies.
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The Nasdaq is a stock exchange in the US, known for listing a high proportion of technology stocks. The Nasdaq Composite tracks most of the stocks listed on the Nasdaq. The Dow Jones is an index that tracks 30 major US stocks. Dow Jones stocks are hand picked, whereas Nasdaq Composite stocks include all stocks that meet certain basic criteria.
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