A Tale of Two Markets: the NYSE and Nasdaq

The New York Stock Exchange and the Nasdaq often seem to be like two ends of a seesaw - when one is up, the other is down. That’s because the two markets are very different in their makeup, and they often appeal to different kinds of investors.

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The NYSE

The New York Stock Exchange (NYSE), also called the Big Board, is the granddaddy of stock exchanges, tracing its lineage to 1792. The NYSE is housed in a building in New York, and there are 1,366 seats on the exchange; a seat allows the seat holder to trade on the NYSE. The number of seats has remained the same since 1953.

The main measure of the performance of the NYSE is the Dow Jones Industrial Average, or the Dow. The Dow is a list of 30 blue-chip stocks, representing long-established, large companies. When the first Dow was published on May 26, 1896, there were 12 stocks in the index, and its value was 40.94. In recent months, the Dow has passed the 11,000 barrier.

Sometimes stocks are listed first on other exchanges, such as the Nasdaq, before being listed on the NYSE

The Nasdaq

The Nasdaq - National Association of Securities Dealers Automated Quotation System - was formed in 1971. It has no physical location; instead, its trades are executed electronically. The Nasdaq is the fastest-growing stock market in the United States.

The Nasdaq is actually made up of two separate markets. The Nasdaq National Market lists more than 4,400 of the Nasdaq’s largest and most actively traded securities. It includes many large and well-known companies. The Nasdaq SmallCap Market, on the other hand, specializes in smaller, emerging companies; companies that start out in this market sometimes move to the National Market after they have become more established. Almost 1,800 companies are listed on the SmallCap Market.

Which one’s for you?

The Nasdaq promotes itself as the market for cutting-edge companies. It has become the site for many technology and Internet companies, a segment that has seen significant growth recently. However, this segment also tends to be more volatile than many other segments.

The NYSE, as measured by the Dow, also has achieved record growth in recent years. But its stocks tend to be somewhat less volatile than stocks listed on the Nasdaq.

Each exchange offers access to the stocks of many fine companies, and neither exchange is without risk. Rather than choosing an exchange, you might be better off to choose companies whose stock you believe will increase in value. And, as always, you should diversify your investments, so that you are less vulnerable to difficulties in any single company, sector of the economy - or exchange.