The stock market is a big place to see and understand and plays a very important role in the economy of a nation. Basically, a stock market is a place where the shares of a company or organization can be sold or bought.
This is a whole other world where people use different techniques and keywords to refer to or make money for their personal use. Now the thought which can cross your mind is what a company gets on when giving their profit of theirs to their shareholders.
They eventually get investors for the company, which helps them to grow.
Key Takeaways
- The Dow Jones Industrial Average tracks 30 large, well-established US companies, while the NASDAQ Composite Index includes over 3,000 companies, primarily in technology and innovation.
- The Dow Jones is a price-weighted index, reflecting the stock price of its constituents. In contrast, NASDAQ is market-capitalization-weighted, considering the total market value of its listed companies.
- Investors use the Dow Jones as a barometer for the overall health of the US economy, while NASDAQ indicates the performance of technology and innovative sectors.
Dow Jones vs Nasdaq
The difference between Dow Jones and Nasdaq is based on how and what their functions are. Dow Jones is just an average of the market, which represents how the market is going at the present time, whereas Nasdaq works totally differently. Nasdaq provides a platform for the exchange of shares without suffering from the hassle of being on the physical floor.
Dow Jones is also misunderstood and misused while referring to the share market or economy of a nation. It really represents the average of the market to make people easily understand the situations and scenes of current market changes in their nations.
It is an important index for investors to determine the situation going on in the market and completely refers to the Dow Jones Industrial Average (DJIA).
Nasdaq is basically known for two purposes which it performs in the life of investors. This term is also sometimes used in the place of market or economy, which is totally wrong. The first reference to Nasdaq is as an index that is used to indicate the market understanding.
Another application of Nasdaq is that it is the first platform in history that made the exchange of stock possible without the worries of physical exchange. It made it so easy that everyone could use it and do the trading.
Comparison Table
| Parameters of Comparison | Dow Jones | Nasdaq |
|---|---|---|
| Official Identity | Dow Jones Industrial Average (DJIA) | National Association of Securities Dealers Automated Quotients |
| Function | Indicator for the current situation of the stock market. | Indicates the current scenario of the market in a nation with some other functionality too. |
| Exchange | Exchange of shares is not possible. | It is the first platform that made buying and selling of shares so easy. |
| No. of companies | It only tracks the 30 biggest companies for the indication. | It tracks 3500 companies for the indication application of Nasdaq. |
| Type of companies | It consists of all the companies based on their earnings. Hence, the stock price. | It consists mostly of companies based on the technologies. |
What is Dow Jones?
Dow Jones is also misunderstood and misused while referring to the share market or economy of a nation. It really represents the average of the market to make people easily understand the situations and scenes of current market changes in their nations.
It is an important index for investors to determine the situation going on in the market and completely refers to the Dow Jones Industrial Average (DJIA).
It is an index that is used by most investors to determine the present situations and patterns of the market. It consists of 30 major companies for the indication purpose and can help the investor well.
The companies involved are based on the highest stock prices. So the capability of getting into the Dow Jones is based totally on the earnings of the company. This was invented by Charles Dow. It was invented in the year of 1896.
What is Nasdaq?
Nasdaq is basically known for two purposes which it performs in the life of investors. This term is also sometimes used in the place of market or economy, which is totally wrong. The first reference to Nasdaq is as an index that is used to indicate the market understanding.
Another application of Nasdaq is that it is the first platform in history that made the exchange of stock possible without the worries of physical exchange. It made it so easy that everyone could use it and do the trading.
They made it possible for the use of the physical floor for trading to be eliminated, and users can buy or sell their stocks on a speedy computer that is easily accessible and transparent. The life of investors is made so easy by this invention.
Nasdaq tracks companies from all fields, but mostly out of them are technology-based. It tracks more than 3300 companies for the indication. It was established in the year 1971. It also has the highest volumes in trade. This comparison is not nation-based but all over the globe included.
Main Differences Between Dow Jones and Nasdaq
- The difference starts with the abbreviations of both of these. Dow Jones represents the Dow Jones Industrial Average (DJIA), whereas Nasdaq represents as National Association of Securities Dealers Automated Quotients.
- The main function of both the Dow Jones and Nasdaq is to indicate the market situations. That’s why sometimes they are also used in place of the market or economy. But the difference is Nasdaq also does some other functions that Dow Jones does not.
- Exchange of stocks meaning buying and selling of stocks, is possible on the platform of Nasdaq, whereas Dow Jones does not support this functionality.
- Dow Jones only tracks the 30 biggest companies for the indication, whereas Nasdaq tracks 3500 companies for the indication application of Nasdaq.
- It consists of all the companies based on their earnings. Hence, the companies with major stock prices are included, whereas Nasdaq consists mostly of companies based on the technology.
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1994.tb04782.x
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1978.tb02054.x
- https://www.sciencedirect.com/science/article/pii/S0304405X05002163
- https://www.sciencedirect.com/science/article/pii/0304405X93900257
- https://onlinelibrary.wiley.com/doi/abs/10.1111/0022-1082.00495
Last Updated : 09 August, 2023
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
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