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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. It’s a question you’ll frequently hear during any program discussing the latest financial news: “What did the market do today?” The answer often includes a reference to an index such as the Dow Jones Industrial Average, the or the Nasdaq. But what are these? And what distinguishes one from the other? What are the Dow Nasdaq and S&P 500
Before diving into the differences between the Dow vs. the Nasdaq vs. the S&P 500, it’s important to understand the key commonality among them: In this context, they are all referring to market indexes — not . Each of these three major stock indexes tracks a certain subset of , and the movements — day to day, month to month and year to year — offer a view of how the broader market is performing and the sentiment among investors. The Dow Jones Industrial Average
The Dow Jones Industrial Average — often shortened to the Dow — is the most well-known and longest-running market index. It’s been around since 1896, and it consists of 30 , U.S.-based companies that trade either on the New York Stock Exchange or the Nasdaq exchange. Some of the largest publicly traded companies in the country — , Coca-Cola, Home Depot and Nike, to name a few — are included in the Dow. As of this writing, the 30 companies have a collective market capitalization of more than $9.2 trillion. While the Dow carries plenty of historical significance, its limited scope of just 30 companies and the fact that the index is price-weighted rather than being weighted by the value of the company make it an unreliable barometer of the entire market. When you hear about the Dow, some of those references may be intended to make the movement of the day seem more dramatic. Consider which of these headlines is bound to get more attention: “The Dow fell 300 points today,” or “The S&P 500 was down 36 points today.” In both cases, the decline is roughly 1 percent. There is, however, a time when activity in the Dow is headline-worthy: when the makeup of those 30 companies changes. For example, in August 2020, the index replaced Pfizer, Raytheon Technologies and Exxon Mobil with Salesforce, Amgen and Honeywell International. That’s a moment of prestige for the companies making their way into the index and a reflection of recent underperformance or loss of relevance for companies that are being removed from it. The Nasdaq
At first glance, hearing “the Nasdaq” may feel a bit confusing because it is a stock exchange. However, the and the Nasdaq 100 are both market indexes that represent the ups and downs of particular stocks that are listed on the Nasdaq exchange. The Nasdaq Composite includes more than 3,000 stocks traded on the Nasdaq, and the Nasdaq 100 includes 100 large non-financial stocks — Starbucks, Netflix, and PepsiCo, to name a few — traded on the Nasdaq. The Nasdaq indexes are usually cited as a reference to the performance of technology stocks, but stocks from various industries are included in the Nasdaq averages. The S&P 500
The includes 500 large, U.S.-based publicly traded companies, including all those listed in the Dow Jones Industrial Average, regardless of the stock exchange that is home to their trading activity. Though this index includes just 500 of the more than 6,000 publicly traded U.S. stocks, the S&P 500 tells a more complete story of what the market is doing than the Dow or Nasdaq 100. It represents about 80 percent of the value of all publicly traded companies in the U.S., according to S&P Global. The S&P 500 weights companies by their total market capitalization (the stock price multiplied by the number of each company’s outstanding shares). This formula means that larger companies carry more weight than smaller companies. In fact, more than 20 percent of the value is in Apple, , Tesla and . Because the S&P 500 contains hundreds of large companies and represents the lion’s share of total stock market value, it is considered a much better gauge of how the market is performing, even though it excludes thousands of smaller and midsize companies. It’s important to note that the S&P 500 changes on a more frequent basis than the Dow as companies grow their way into the mix and other companies are no longer considered large enough to be included. Alternatives to the Dow Nasdaq and S&P 500
The Dow, Nasdaq and S&P 500 aren’t the only games in town for understanding the market’s performance. The Wilshire 5000 is designed to represent the entire U.S. stock market, and the is solely focused on small-cap stocks. While these less-established companies tend to carry greater potential for risk, they also offer what every investor wants: more room to grow and profit. SHARE: Greg McBride, CFA, is Senior Vice President, Chief Financial Analyst, for Bankrate.com. He leads a team responsible for researching financial products, providing analysis, and advice on personal finance to a vast consumer audience. Lance Davis is the Vice President of Content for Bankrate. Lance leads a team responsible for creating educational content that guides people through the pivotal steps in their financial journey. Related Articles