What are stock market indexes?

A stock market index shows how a large group of stocks is performing. Often, an index is interpreted as a barometer for the economy. An index collects data from a variety of companies across industries. Together, that data forms a picture that helps investors compare current price levels with past prices to calculate market performance.

The S&P 500 (also known as the Standard & Poor's 500), a registered trademark of the joint venture S&P Dow Jones Indices, is a stock index that consists of 500 of the largest companies in the U.S. It is generally considered the best indicator of how U.S. stocks are performing overall.

Which ETF is best for beginners?

A good ETF for beginners is an index fund like the SPDR S&P 500 ETF or the Vanguard S&P 500 ETF. These give you exposure to the top American stocks and have a track record of solid growth.

How much do I need to invest in ETFs to get $1000 a month?

The amount you need to invest to get $1000 a month in dividends depends on the ETF you choose. One popular dividend ETF is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD), which offers a 3.3% dividend yield. At that yield, you have to invest $360,000 to get $1,000 a month in dividends.

Dow Jones Industrial Average

Q: What is the Dow Jones?

The Dow Jones Industrial Average is a stock index that tracks 30 of the largest U.S. companies. Created in 1896, it is one of the oldest stock indexes, and its performance is widely considered a useful indicator of the health of the entire U.S. stock market.

By Jeremy Bowman – Updated May 16, 2026 at 1:01 AM EST | Fact-checked by Margo Winton Parodi

Key Points

The Dow Jones index tracks 30 large U.S. companies, giving a picture of the overall market.
Investors can invest in the Dow by buying shares of ETFs that track the index or of companies listed in the index.
A particular denominator, known as the Dow Divisor, is used to calculate the value of the Dow Jones Industrial Average.

When the news says "the market was up today," they're usually talking about the Dow. The Dow Jones Industrial Average is the most widely quoted stock index in the world, and one of the oldest, dating back to 1896.

Despite its fame, many investors don't fully understand what it actually measures, how it's calculated, or why it still matters in an era of broader indexes like the S&P 500.

Whether you're a first-time investor trying to make sense of financial headlines or a seasoned trader looking to brush up on the basics, this guide breaks down everything you need to know about the Dow, from its origins to how you can invest in it today.

What is the Dow Jones Industrial Average Stock Index?

The Dow Jones Industrial Average (^DJI -1.07%) is a stock index that tracks 30 of the largest U.S. companies. Created in 1896, it is one of the oldest stock indexes, and its performance is widely considered to be a useful indicator of the health of the entire U.S. stock market.

The Dow Jones Industrial Average index is managed by S&P Dow Jones Indices, a joint venture majority-controlled by the financial information and analytics company S&P Global (SPGI -0.19%).

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The Dow Jones Industrial Average includes not just industrial stocks but also stocks from most sectors and industries, except for utilities and transportation, which are measured by other indexes specific to those fields.

According to S&P Global, the Dow Jones Industrial Average is a "world-renowned gauge of the U.S. equity market." Most Dow Jones Industrial Average–listed companies trade on the New York Stock Exchange.

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Can you buy Dow Jones stock?

You can't buy stock in the Dow Jones Industrial Average itself, but you can get exposure to the Dow and the companies included in the index.

Your investment options include:

1. Buy shares of all 30 companies included in the Dow Jones Industrial Average.

With only 30 companies in the index, it's possible to directly purchase each stock in the Dow. Most brokers don't charge commissions on trades, and many allow fractional share investments, meaning you can buy partial shares.

This investment alternative requires you to manage 30 separate stocks and make changes to your portfolio whenever the index changes (although, historically, the index only changes every couple of years).

2. Buy shares in a Dow-focused ETF

Exchange-traded funds (ETFs) that track the Dow's performance, such as the SPDR Dow Jones Industrial Average ETF (DIA -1.03%), will get you invested in the 30 companies listed in the Dow. Buying shares in an ETF is simpler than investing in 30 separate companies, and you won't have to make changes to your portfolio when the companies listed by the Dow change.

As with most ETFs, an annual expense ratio -- a management fee -- is assessed by this ETF. The expense ratio of 0.16% works out to a fee of $1.60 per year for every $1,000 invested.

3. Invest in Dow options or futures contracts

You can buy Dow options contracts through the CBOE Global Markets options exchange and Dow futures contracts using the CME Group's (CME +0.39%) Chicago Mercantile Exchange. These types of securities are best suited for experienced investors since trading options and futures can be risky.

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How is the value of the Dow Jones Industrial Average calculated?

Most stock market indexes are weighted by market capitalization -- equal to share price times the number of shares outstanding. But the Dow Jones Industrial Average is price-weighted.

The value of the Dow Jones Industrial Average is calculated by determining the average value of the stock prices of the 30 listed companies. However, calculating that average value is not as simple as totaling the 30 stock prices and dividing by 30.

Mergers, spinoffs, stock splits, and other developments complicate the arithmetic and require a committee to formally determine a "Dow divisor" -- the denominator by which the sum of the 30 share prices is divided. As of May 2026, the Dow divisor was 0.162423. Using this divisor, you can calculate the value of the Dow Jones Industrial Average by adding up the share prices of all 30 Dow companies and dividing that amount by 0.162423.

Any change in the share price of any Dow-listed company affects the value of the index equally, in accordance with Charles Dow's original vision. But it's important to realize that, on a percentage basis, the movements of the highest-priced stocks have the greatest impact on the index's value.

For example, the highest-priced stock on the Dow in May 2026 was Goldman Sachs, trading at $948.47. The lowest-priced stock was Nike, trading at $41.88. Since Goldman's stock price is more than 20 times greater than Nike's, Nike's share price would have to change by more than 20% to have the same impact on the Dow as a change of just 1% in the price of Goldman stock.

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An infographic comparing the origins of and types of stocks in the Dow Jones Industrial Average, the S&P 500 and the Nasdaq. — Image source: The Motley Fool.

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The Dow Jones Industrial Average vs. the S&P 500 and the Nasdaq Composite

The Dow Jones Industrial Average is just one of three major indexes that many investors use to measure the performance of the stock market. The other two are the S&P 500 (^GSPC -1.24%) and the Nasdaq Composite (^IXIC -1.54%).

The S&P 500 is an index of 500 large-cap stocks that are chosen using certain criteria, such as market cap and profitability, by a committee of the S&P Dow Jones Indices. The Nasdaq index tracks more than 2,500 stocks, or almost every stock traded on the Nasdaq Exchange.

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Unlike the Dow, the S&P 500 and the Nasdaq are market capitalization–weighted, meaning that the most valuable companies influence index values the most. Both the S&P 500 and the Nasdaq are more heavily weighted toward technology stocks than the Dow, and the Nasdaq has the most tech exposure of all three indexes.

The stocks of tech giants such as Alphabet (GOOG -1.03%)(GOOGL -1.15%), Meta (META -0.66%), and Tesla (TSLA -4.74%) aren't included in the Dow, but they are major components of the S&P 500 and the Nasdaq.

The Dow underweights the tech sector and is more weighted than its peers toward cyclical sectors such as financial services and heavy industry. Despite the differences, the Dow and the S&P 500 tend to perform similarly.

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Other major market indexes

S&P 500 Explained: How the Index Works and How to Invest in It

The 500 largest companies make up this bellwether index.

Your Complete Guide to the Nasdaq Composite Index

Once you understand how the Nasdaq Composite Index works, you can learn to use this index to help guide you in creating wealth.

Your Complete Guide to the Russell 2000 Stock Market Index

The Russell 2000 index is considered a benchmark for smaller U.S. stocks.

Stock Market Indexes Explained: What They Are and Why They Matter

What are the major stock market indexes, and what stocks do they contain?

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Most professional investors focus on the performance of the S&P 500 because it includes a broad range of stocks and is weighted by market cap. That is a more accurate way to measure the overall health of the stock market.

The Dow Jones Industrial Average may not be as comprehensive or precise as the S&P 500 or a total market index such as the Wilshire 5000 Total Market Index (WFIV.X -1.25%), but this long-standing index still serves as a good indicator of the stock market's overall direction and functions as a convenient short list of some of the most powerful companies in the U.S.

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FAQs

Dow Jones FAQs

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

TMFHobo

@TMFBowman

JPMorgan Chase is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Jeremy Bowman has positions in Amazon, Home Depot, Meta Platforms, Nike, Nvidia, Visa, and Walt Disney. The Motley Fool has positions in and recommends 3M, Alphabet, Amazon, Amgen, Apple, Boeing, Caterpillar, Chevron, Cisco Systems, GE Aerospace, Goldman Sachs Group, Home Depot, Honeywell International, Intel, International Business Machines, JPMorgan Chase, Merck, Meta Platforms, Microsoft, Nike, Nvidia, S&P Global, Salesforce, Tesla, Visa, and Walt Disney. The Motley Fool recommends CME Group, Johnson & Johnson, Sherwin-Williams, UnitedHealth Group, and Verizon Communications. The Motley Fool has a disclosure policy.

Dow Jones Industrial Average

Key Points

What is the Dow Jones Industrial Average Stock Index?

Can you buy Dow Jones stock?

1. Buy shares of all 30 companies included in the Dow Jones Industrial Average.

2. Buy shares in a Dow-focused ETF

3. Invest in Dow options or futures contracts

How is the value of the Dow Jones Industrial Average calculated?

The Dow Jones Industrial Average vs. the S&P 500 and the Nasdaq Composite

Other major market indexes

S&P 500 Explained: How the Index Works and How to Invest in It

Your Complete Guide to the Nasdaq Composite Index

Your Complete Guide to the Russell 2000 Stock Market Index

Stock Market Indexes Explained: What They Are and Why They Matter

FAQs

Dow Jones FAQs

What is the Dow Jones?

What is the Dow Jones?

What are stock market indexes?

What are stock market indexes?

What is the S&P 500?

What is the S&P 500?

Which ETF is best for beginners?

Which ETF is best for beginners?

How much do I need to invest in ETFs to get $1000 a month?

How much do I need to invest in ETFs to get $1000 a month?

About the Author

Read Next

Stocks Mentioned

Premium Investing Services

What is the Dow Jones Industrial Average Stock Index?

How is the value of the Dow Jones Industrial Average calculated?

The Dow Jones Industrial Average vs. the S&P 500 and the Nasdaq Composite

S&P 500 Explained: How the Index Works and How to Invest in It

Your Complete Guide to the Nasdaq Composite Index

Your Complete Guide to the Russell 2000 Stock Market Index

Stock Market Indexes Explained: What They Are and Why They Matter

Dow Jones FAQs

What is the Dow Jones?

What is the Dow Jones?

What are stock market indexes?

What are stock market indexes?

What is the S&P 500?

What is the S&P 500?

Which ETF is best for beginners?

Which ETF is best for beginners?

How much do I need to invest in ETFs to get $1000 a month?

How much do I need to invest in ETFs to get $1000 a month?

Can you buy Dow Jones stock?

1. Buy shares of all 30 companies included in the Dow Jones Industrial Average.

2. Buy shares in a Dow-focused ETF

3. Invest in Dow options or futures contracts

A brief history of the Dow Jones Industrial Average

Companies in the Dow Jones Industrial Average