Overview:
The Nasdaq Composite is a broad market index that encompasses about 4,000 issues traded on the Nasdaq National Market. The index first started in February of 1971 with a base value of 100.00. Though it is not as actively traded as its much smaller cousin, the Nasdaq 100, this index is more commonly referred to by investors and the financial press. When the question �How did the Nasdaq do today?� is asked, the answer is usually the value of this index.

Composition:
The Nasdaq Composite Index is comprised of virtually every firm that trades on the exchange. The index is calculated based on a market cap weighting, meaning that the largest firms have the greatest impact on the index's value. The top 10 stocks in the index account for greater than 30% of the Nasdaq Composite's value--a truly remarkable statistic given that the index contains roughly 4,000 firms. Microsoft (MSFT) alone comprises about 9% of the index.

Positives:
The Nasdaq Composite is one of the premier indices in the world. Because technology firms account for roughly 2/3 of the index, investors often use the Nasdaq as a guide to help them determine the strength of technology stocks.

Drawbacks:
Because this index contains many unproven and speculative companies, it tends to be highly volatile relative to the other major indices. In addition, given that it represents such a small portion of the overall market, investors cannot use it to infer how the overall economy is faring.

How can I trade/invest in this index?
In September 2003 Fidelity Investments introduced the Fidelity Nasdaq Composite Index Fund (symbol ONEQ)--an exchange-traded fund that tracks the performance of this index. Much like any other ETF, investors can easily buy and sell this fund during the day. In addition, the fund carries a small 0.30% expense ratio. However, it has not yet gained the popularity of the QQQ (an ETF that tracks the Nasdaq 100 Index), so liquidity may be more of an issue if you're attempting to trade this fund. And because it is more diversified, volatility should be slightly lower than that of QQQ. In general, because QQQ has a lower expense ratio and higher liquidity, most investors choose to trade that fund as opposed to ONEQ.

Additional Information:
Nasdaq Composite fact sheet  
Fidelity ONEQ