What’s the difference between the Dow Jones, the NASDAQ 100, and the S&P 500?

So just which of these 3 indexes is the most important to pay attention to when you flip on the news? Well, they are all part of the broader stock market, but each index measures its own slice of the pie in a specific way. The Dow Jones Industrial Average (often just referred to as "the Dow") is made up of 30 large, publicly owned blue-chip companies that trade daily on the New York Stock Exchange and NASDAQ. This index is the oldest and most popular index of the 3, and is a great benchmark for the blue-chip companies with relatively historically stable earnings (like Disney and Microsoft). The downside though is it just tracks 30 companies, so not very broad coverage. The NASDAQ 100 is an index of the 100 largest and most actively traded US companies that are listed on the NASDAQ stock exchange. The NASDAQ 100 is known for having a more technology leaning bias, which makes up over half of the index's weight. The NASDAQ 100 is much more diverse than the more traditional Dow, but still with its limitations considering the stock market is made up of thousands of stocks. The S & P 500 is the most diverse index of the 3 major indexes. S & P stands for Standard & Poor's, and this measures the 500 largest publicly traded companies in the US. This index is generally regarded as the best gauge of large-cap US stocks, and for the public's sake, probably the most indicative of general market sentiment due to its wide coverage of many different sectors and volume of stocks. All three indices track the market, and over time generally are similarly correlated, but each has its own spin on what companies it tracks.

-Your Friends at Red Oak Financial Group