What Does NASDAQ Stand For?

The Nasdaq is one of the major stock exchanges in the United States, often known as the home to technology stocks. It has been in business since 1971, when it introduced all-electronic trading, as opposed to the traditional system involving physical negotiations on stock market floors. The Nasdaq index, which tracks the prices of stocks traded on the exchange, is often watched as an indicator of the performance of the market as a whole and, especially, the technology industry.

Nasdaq launched in 1971, offering the first all-electronic system for trading stocks. Its digital roots have helped attract technology startups and major tech companies including Microsoft, Apple and Dell.

Today, about 3,600 companies' stock is available to buy and sell on the Nasdaq exchange. Collectively, they're valued at about $9.6 trillion. Nasdaq is also known as a technology provider, and its technology and software are behind about one in 10 securities transactions worldwide.

Nasdaq was named for the National Association of Securities Dealers, or NASD, an organization involved in the securities trade's self-regulatory activities when the exchange was started. NASD ran Nasdaq, regulated some stock trades and administered the Series 7 exam that qualifies people to work in the securities industry.

NASD was originally founded in 1939, soon after stock market regulation ramped up during President Franklin Roosevelt's New Deal as part of the reaction to the 1929 stock market crash and the Great Depression.

In 2007, NASD merged with the regulatory committee of the New York Stock Exchange to form a unified self-regulatory body known as the Financial Industry Regulatory Authority, commonly abbreviated as FINRA. It performs most of the duties formerly handled by NASD.

One of the most commonly watched stock market indices in the world is the Nasdaq composite index. It's determined based on the prices of stocks traded on the Nasdaq exchange, weighted by market capitalization, or the total value of all their shares that are outstanding.

Its performance is seen as a barometer for how the tech industry in particular is performing. A separate index, called the Nasdaq 100, tracks the 100 largest nonfinancial companies available to trade on the Nasdaq stock exchange.

Another commonly monitored index is the Dow Jones industrial average, abbreviated to DJIA or simply called the Dow. It tracks the prices of 30 major companies in the U.S.

Standard & Poor's 500 index is based on 500 major U.S. companies, and is also widely monitored as a measure of overall stock market performance.

Other indices cover specific industries or the markets of other countries around the world.

If you believe that the Nasdaq composite index is going to perform well, you can buy an index fund that by definition invests in the companies traded on the index. Other index funds track other indices, like the S&P 500 or the Dow, or track specific industries and sectors, such as energy, pharmaceuticals or transportation.

Check with a brokerage of your choice to see which index funds are available and at which prices. As with any mutual fund investing, make sure you understand the prices for which shares in the fund are available, how dividends are handled, what fees are involved for people who own shares in the fund and what sorts of commissions you'll have to pay to invest in the fund.

Generally, you'll want to invest in a Nasdaq index fund if you think the tech industry will do well during the time you'll own shares in the fund.