The S&P 500 and the NASDAQ, two important indicators in the U.S. stock market, each have unique characteristics and functions.
First of all, their concepts are different. The S&P 500 index is compiled by Standard & Poor's and contains the stocks of 500 large U.S. listed companies, covering major exchanges such as the New York Stock Exchange and Nasdaq. It is a bellwether of the overall health of the U.S. economy. By contrast, the Nasdaq, or U.S. Technology Index, focuses on over-the-counter trading of unlisted tech stocks and brings together stockbroker quotes from more than 5,200 companies, with a particular focus on tech and growth companies such as Apple and Google.
Riskiness-wise, the Nasdaq 100 is relatively risky as its constituents are mostly tech stocks, but it also reflects the dynamics of the tech sector. The S&P 500, on the other hand, is more diversified in terms of risk as it includes a wide range of sectors and reflects a more comprehensive picture of market changes.
In the direction of the industry, the Nasdaq 100 focus on technology and network stocks, the S&P 500 is more extensive, involving a variety of areas such as industrial, financial, including the Dow Jones Industrial Average, the three major U.S. stock indexes have their own focus.
By extension, the composition of the S&P 500 is not static, as mergers, bankruptcies, turnarounds or loss of representation can lead to adjustments in its constituents. Overall, the S&P 500 and Nasdaq each represent different market dimensions and risk profiles, and investors should choose to track them based on their own investment strategies and risk tolerance.