Dow Jones Industrial Average

How This Index Works

The Dow is price-weighted: each member’s weight is its share price divided by the sum of all 30 members’ prices, so a $500 stock sways the index more than a far larger company trading at $100. The level is that price sum divided by the Dow Divisor, a constant adjusted for splits and membership changes so the series stays continuous back to 1896. Members are chosen by an S&P Dow Jones Indices committee for reputation, sustained growth, and sector representation; there is no mechanical size rule, and changes are rare.

Frequently Asked Questions

What is the Dow Jones Industrial Average?

An index of 30 large, established U.S. companies ("blue chips") selected by committee to represent the broad economy. First calculated in 1896, it is the oldest continuously quoted U.S. market index and still the number most news bulletins lead with.

Why is the Dow price-weighted?

History. In 1896 Charles Dow simply averaged the share prices of his 12 industrial stocks, and the method stuck. Modern indexes weight by market cap instead; the Dow keeps its original arithmetic for the sake of a continuous 130-year series.

How do I invest in the Dow?

The SPDR Dow Jones Industrial Average ETF Trust (DIA) holds all 30 members at their price weights and distributes dividends monthly.

Is 30 companies enough to represent the market?

The Dow is a barometer, not the whole market: 30 mega-caps chosen for representativeness, against roughly 500 in the S&P 500. Over long stretches the two track each other closely, but the S&P 500 is the better proxy for the total U.S. market and the usual benchmark for index funds.