Nasdaq vs. S&P 500: What's the Difference?
"The Nasdaq" can mean an exchange, a broad index or a 100-stock index. Here is how each compares with the S&P 500 and why they often move differently.
Key takeaways
- Nasdaq is a stock exchange. The Nasdaq Composite and the Nasdaq-100 are indexes of stocks listed there.
- The Nasdaq-100 holds 100 of the largest non-financial companies on the exchange.
- The S&P 500 covers about 500 large US companies from every sector, on any major US exchange.
- The Nasdaq-100 leans heavily toward technology, so it usually swings more than the S&P 500.
Three things called "Nasdaq"
- The Nasdaq Stock Market is an exchange where shares are bought and sold, alongside the New York Stock Exchange.
- The Nasdaq Composite includes almost all common stocks listed on Nasdaq, a few thousand companies.
- The Nasdaq-100 includes the 100 largest non-financial companies listed on Nasdaq. When people say "the Nasdaq" in the context of index funds, they usually mean this one.
Side by side
| Nasdaq-100 | S&P 500 | |
|---|---|---|
| Companies | 100 | About 500 |
| Exchanges | Nasdaq only | NYSE and Nasdaq |
| Financial companies | Excluded | Included |
| Profitability rule | None | Required to join |
| Selection | Rules based, by size | Committee, using rules |
| Sector tilt | Heavy in technology | Broad, all sectors |
| Weighting | Modified market value | Market value |
Why they move differently
The Nasdaq-100 has no banks, insurers or most energy companies, and a much larger share in technology and communication firms. When growth stocks rally, it usually beats the S&P 500. When interest rates jump or technology sells off, it usually falls further. That is why its daily moves are often bigger in both directions.
There is a lot of overlap at the top. The biggest technology companies are in both indexes and carry large weights in each, so on many days the two move together.
What about the Dow?
The Dow Jones Industrial Average follows only 30 large companies and is weighted by share price, not company size. A stock with a high share price moves it more, regardless of how big the company is. That makes it a less precise gauge than the S&P 500, though it remains a familiar headline number.
Which index fund?
An S&P 500 fund is the broader, more diversified choice. A Nasdaq-100 fund is a bigger bet on technology and growth. Many investors use the S&P 500 as a core holding, since both hold the same giant companies at the top. Read S&P 500 Index Funds, Explained to compare fees and fund types, and watch both indexes live on our stocks page.
This article is general education, not personalized financial advice. Read our editorial policy and disclaimer.
