Investor beginners or people who are planning to invest in international stock markets often get confused or are not sure of the terms NASDAQ and Dow Jones. Individuals who are looking forward investing abroad must understand these important indices.
These two indices are similar as they provide a summary of the overall market by tracking some of the top stocks of the US financial market. However, a single company can be listed in more than one index.
Here is the basic difference between NASDAQ and Dow Jones
The Dow Jones Industrial Average (DJIA)
It is one of the oldest and most widely used stock market indexes in the world. It gets its name from its founder, Charles Dow, who started the index with top 12 companies in 1896. Now, the Dow Jones tracks 30 top company stocks in US that are the major players in their respective industries.
The index called Dow Jones Industrial Average (DJIA) is made of companies that are traded on the New York Stock Exchange. The financial market health can be derived from the overall movement of Dow Jones means, the Dow sets the trend for other market indicators. If the Dow is higher, means the market in general is up.
The Dow Jones index is calculated by adding the price of the 30 stocks and dividing the total by a number known a Dow divisor which is called Share Price weighting method.
NASDAQ stands for National Association of Securities Dealers Automated Quotations System and is the world's very first computerized stock exchange. NASDAQ is followed by many investors and professional as it provides broder ranges of companies when compared to Dow Jones.
Nasdaq, which is known as the "Nasdaq Composite," tracks the companies that are traded on the Nasdaq exchange. Nasdaq is calculated by using a weighted market capitalization method.
It is dominated largely by technology companies and has companies like Apple and Google.