You hear it every night on the news: "The Nasdaq rose today." But what exactly went up? The Nasdaq is one of the most misunderstood words in investing, because it actually means two different things, and people use it interchangeably.
One meaning is a stock exchange, a marketplace where shares trade. The other is an index, a scoreboard that tracks how a group of those stocks is doing. Sorting out the two is the key to understanding what you are really buying. Here is the plain-English version, plus how a beginner can start investing in it.
This is general education, not financial advice. All investing involves risk, including possible loss of principal.
The Nasdaq as an exchange
The Nasdaq is a stock exchange, the second-largest in the world by the value of the companies listed on it, behind the New York Stock Exchange. When a company "lists on the Nasdaq," it means its shares are bought and sold through that marketplace.
It launched in 1971 as the world's first fully electronic exchange, with no physical trading floor. That tech-forward identity is why so many technology and growth companies chose to list there. Big names like Apple, Microsoft, Nvidia, Amazon, and Alphabet all trade on the Nasdaq exchange.
The Nasdaq as an index (actually two)
When the news says the Nasdaq is up or down, it usually means an index, not the exchange. An index is just a number that tracks a basket of stocks so you can see how that group performed.
There are two main ones. The Nasdaq Composite tracks almost every stock listed on the Nasdaq exchange, more than 3,000 companies. The Nasdaq-100 tracks the 100 largest non-financial companies on the exchange, and it is heavily weighted toward technology. Because both lean tech-heavy, they tend to move more sharply than a broad index like the S&P 500, rising faster in good years and falling harder in rough ones.
You cannot buy "the Nasdaq" directly
Here is the part that trips up beginners: you cannot buy an index. An index is a measurement, not a product. What you can do is buy a fund that is built to track an index.
The most common way is an index ETF, a fund that holds the same stocks as the index in the same proportions. Popular examples track the Nasdaq-100, so when that index rises 1%, the fund aims to rise about 1% too. You buy shares of the ETF the same way you buy a single stock, through a brokerage account.
How to start investing in the Nasdaq
The first step is opening a brokerage account, which is usually free and takes a few minutes. From there you can buy a Nasdaq-tracking ETF, an individual Nasdaq-listed stock, or both.
Robinhood is a common starting point for beginners because it has no commission on stock and ETF trades, supports fractional shares so you can start with a few dollars, and keeps the app simple. That makes it easy to buy a slice of a Nasdaq-100 ETF without needing the full share price upfront.
Robinhood
Robinhood
Robinhood is a trading platform that brings stocks, ETFs, options, futures, prediction markets, crypto, and retirement accounts together in one app.
Standout feature
One platform for stocks, ETFs, options, futures, prediction markets, and crypto
Fees
$0 commission on stocks, ETFs, and options.
Pros
Zero-commission trading on stocks, ETFs, and options
Cons
Best perks (high APY, lower margin rates) require Gold subscription ($5/month)
Public is another beginner-friendly choice. It also offers commission-free stock and ETF trading plus fractional shares, and it adds context and community features that explain why a stock or index moved, which can help when you are still learning how the Nasdaq behaves.
Whichever platform you pick, look at the same things: trading commissions, account fees, whether fractional shares are available, and how clearly the app shows what you own. Comparing two before you commit is a smart habit.
Public
Public
Investing for those who take it seriously. Invest in stocks, bonds, options, crypto & more.
Standout feature
A 5%+ yield Bond Account paired with 3.3% APY on cash — Public is one of the only consumer apps where idle and conservative money is treated as seriously as the equity portfolio.
Fees
Free
Pros
• Invest in stocks, bonds, crypto & more• Earn 3.3% APY* on your cash with no fees• 1% match when you transfer your portfolio• Lock in a 5%+ yield with a Bond Account
Cons
Customer support is in-app and email only, no phone
What to keep in mind before you invest
The Nasdaq's tech tilt is a double-edged sword. It has delivered strong long-run growth, but it can be volatile, and a downturn in a few mega-cap tech names can drag the whole index down. A Nasdaq-100 fund is not as diversified as it looks, because the largest companies make up a big share of it.
For that reason many investors treat a Nasdaq fund as one slice of a broader portfolio rather than the whole thing. If you are still mapping out that bigger picture, our beginner guide on where to invest money for good returns lays out the core building blocks that belong alongside a tech-heavy fund. Decide how much risk you are comfortable with, and consider pairing it with a broader index fund. Past performance does not predict future results.
The bottom line
The Nasdaq is both an electronic stock exchange and the indexes that track the stocks listed on it, mainly the broad Nasdaq Composite and the tech-heavy Nasdaq-100. When the news quotes the Nasdaq, it is almost always talking about an index.
To invest, open a brokerage account and buy a fund that tracks the index you want, or individual Nasdaq-listed stocks. Compare a couple of platforms like Robinhood and Public, start small with fractional shares if you are new, and remember that the Nasdaq's growth potential comes with extra ups and downs.
Frequently Asked Questions
Is the Nasdaq the same as the stock market?
No. The Nasdaq is one stock exchange within the larger stock market, alongside others like the New York Stock Exchange. The overall stock market includes all exchanges and the thousands of companies that trade across them.
What is the difference between the Nasdaq Composite and the Nasdaq-100?
The Nasdaq Composite tracks almost every company listed on the Nasdaq exchange, more than 3,000 of them. The Nasdaq-100 tracks only the 100 largest non-financial companies on the exchange and is more heavily concentrated in technology.
How do I invest in the Nasdaq?
You cannot buy an index directly, so you buy a fund that tracks it, usually a Nasdaq-100 index ETF, through a brokerage account. Platforms like Robinhood and Public let you buy these funds commission-free, often with fractional shares so you can start small.
Is investing in the Nasdaq risky?
It carries the normal risks of stock investing plus extra volatility, because the main Nasdaq indexes are heavily weighted toward technology. That can mean bigger gains in strong years and steeper drops in downturns, so many investors hold it as one part of a diversified portfolio.
