Knowing about the Nasdaq can help an investor to make more informed investment decisions. In turn, an investor may be better equipped to reach his investment goals. There are many different options and strategies that can be applied to take advantage of the resources on the exchange. Also, the regulatory oversight that the Nasdaq is subject to gives an investor transparency that is not available in less regulated markets.
Knowing about the Nasdaq might increase your confidence in investing in the stock market. The Nasdaq is an electronic trading platform. As such, trades are executed quickly and efficiently with computers instead of individuals. The Nasdaq uses sophisticated risk-management systems to protect data from privacy breaches or any other type of failure. The procedures are so effective that government officials and corporate executives have attempted to replicate the Nasdaq's approach, according to a 2005 Nasdaq press release.
The Nasdaq 100 index is largely made up of technology stocks. It represents other sectors, as well, with the exception of financial stocks. An investor who is looking to replicate performance in the Nasdaq index can invest in an exchange traded fund, which is a type of mutual fund. In July 2009, technology stocks were among the first to recover from the economic recession and investors in Nasdaq ETFs benefited with profits, according to the ETF Trends website.
Stocks that trade on Nasdaq must meet the criteria enforced by the exchange. If a stock fails to meet these standards, it is in danger of losing its listing on the exchange. The Nasdaq has the support of the Securities and Exchange Commission, a U.S. regulatory agency. A company that is close to losing its Nasdaq listing must file documents with the SEC or publicly disclose its status. Investors are subsequently made aware of the risks surrounding potential Nasdaq investments and can make decisions accordingly.
Many different types of financial securities trade on the Nasdaq. As a result, an investor is not limited to only buying and selling equities. In addition to individual stocks, a Nasdaq investor can trade bonds, which are steady income investments, and derivatives, such as options, which are sophisticated securities that trade based on the value of some other underlying security. ETFs also trade on Nasdaq. These funds trade similarly to individual securities but provide investors exposure to dozens of stocks or bonds.
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