1. Index Investing: Introduction
  2. Index Investing: What Is An Index?
  3. Index Investing: The Dow Jones Industrial Average
  4. Index Investing: The Standard & Poor's 500 Index
  5. Index Investing: The Nasdaq Composite Index
  6. Index Investing: The Wilshire 5000 Total Market Index
  7. Index Investing: The Russell 2000 Index
  8. Index Investing: Other Indexes
  9. Index Investing: Index Funds
  10. Index Investing: Conclusion


The Dow Jones Industrial Average (DJIA) contains 30 of the largest and most influential companies in the U.S. It is the most recognized index in the world, and the one that is frequently referred to as "the market". Despite its popularity, however, the DJIA has some weaknesses as a benchmark for the overall market.

Created By: Charles Dow on May 26, 1896. Currently maintained by Dow Jones & Company.
Number of Companies: It began with 12. Today there are 30.
Types of Companies: Various. The DJIA covers all major areas of the U.S. economy except the transportation and utility sectors.
Selection Criteria: Selection is at the discretion of The Wall Street Journal editors. Reviewed as needed.
How it\'s Calculated: The original DJIA was simply an average of stock prices. Today it uses a price-weighted system. For example, McDonalds\' stock is worth approximately 5% of the DJIA.

Advantages: The DJIA has stood the test of time. It contains 30 of the most familiar blue chip companies in the U.S. and is not considered to be volatile or risky.
Disadvantages: There are well over 10,000 public companies in the U.S. Containing only 30 companies, the DJIA doesn\'t even come close to being a benchmark for the entire market. For this reason, the S&P 500 is beginning to take over as the benchmark of choice. Also, a weighting based on market cap is generally thought to be more effective than price weighting.
Investing: The DJIA has several index funds that track it as well as an Exchange-Traded Fund (ETF) called the Dow Diamonds that trades under the symbol DIA on the American Stock Exchange (AMEX).


Index Investing: The Standard & Poor's 500 Index
Related Articles
  1. Insights

    On This Day In Finance: May 26 - The Birth Of The Dow

    The birth of one of the oldest and most famous stock indexes in the world.
  2. Insights

    A History Of Wall Street Profitability

    Learn about the performance of the Dow Jones Industrial Averages (DJIA) through the decades.
  3. Investing

    S&P 500 Vs. Dow Jones ETF: Which is a Safer Investment? (SPY,DIA)

    Learn about why the risks of investing in the ETFs that track the S&P 500 and the Dow Jones Industrial Average are very similar for investors.
  4. Investing

    The Top Position Holders In The DJIA

    Find out who the major players are in the Dow Jones Industrial Average and who has been kicked out recently.
  5. Trading

    How to Trade Dow Jones Future Contracts

    Learn about the Dow Jones Index futures contracts available and obtain step-by-step instruction on how to trade the stock index futures.
  6. Investing

    Why The Dow Matters

    Although the DJIA only includes 30 stocks, it can tell you a lot about the market as a whole.
  7. Financial Advisor

    The 3 Most Shorted Dow Stocks (V, CAT)

    Read about three heavily shorted stocks that are components of the Dow Jones Industrial Average, including one company with recent success.
  8. Investing

    4 Famous Companies Dropped From the Dow Jones

    Learn about some of the largest and most famous companies that have been removed from the Dow Jones Industrial Average (DJIA) over its 119-year history.
Frequently Asked Questions
  1. What are the Differences Between Ex Works (EXW) and Free On Board (FOB)?

    Learn about Ex Works and Free on Board, the main difference between these Incoterms, and the responsibilities of buyers and ...
  2. What are Common Examples of Monopolistic Markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ...
  3. What is the gold standard?

    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold, but ...
  4. What's the most expensive stock of all time?

    The most expensive publicly traded stock of all time is Warren Buffett’s Berkshire Hathaway.
Trading Center