ArcaMax

Until the dot-com boom of the 1990s, the Nasdaq exchange was a place where smaller companies listed their shares, until they became large enough to gain a spot on the more-established New York Stock Exchange.

The current Nasdaq Composite Index includes more than 2,500 stocks and like the S&P 500, is market-cap weighted. More than half of the index consists of the technology sector, which is why it has become shorthand for “tech” when quoted alongside the Dow and the S&P 500.

Although the Dow, the S&P 500 and the NASDAQ are the three most-cited and watched stock market indexes, they are by no means the only ones.

You can find specific sector indexes (energy, materials, health care), size-indexes (mega-cap, mid-cap, small-cap), as well as comprehensive indexes (FT Wilshire 5000) and those that are calculated based on equal weight, where each company is allocated a fixed equal weight in the index and therefore have the same impact on index performance.

Sometimes the investment world creates an acronym or term to describe trends. Today, seven mega-cap companies have dominated financial market discussions.

The so-called “Magnificent Seven” (“ Mag 7”) include Apple, Alphabet, Microsoft, Amazon, Meta, Tesla and Nvidia. In 2023, the Mag 7 logged an impressive average return of 111%, compared to a 24% return for the broader S&P 500. As a result, they spawned their own index which tracks their movements.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

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