What Is the Dow Jones Industrial Average?

Written by Sam Levine, CFA, CMT
Fact-checked by Dayana Yochim
Edited by Carolyn Kimball

October 21, 2024

The Dow Jones Industrial Average (DJIA) is one of the oldest and most widely recognized stock market indices in the world, originally created by Charles Dow in 1896. The DJIA tracks the price movements of 30 publicly traded U.S. companies across a range of industries – though it excludes those in transportation and utilities.

The index is calculated using a price-weighted method, where the stock prices of its components are summed and divided by a factor that adjusts for stock splits, giving more influence to higher-priced stocks.

About the Dow Jones Industrial Average

The stocks in the DJIA are chosen by a committee within S&P Dow Jones Indices. Its Index Committee considers a company’s reputation, sustained growth rate, and interest from investors before adding or dropping it from the index. Stocks in the transportation and utility sectors are excluded.

Professionals are less reliant on the Dow Jones Industrial Average today because they view 30 companies as being too few to describe market action. Experienced traders tend to prefer broader indices, such as the S&P 500. That said, CNBC calculated that the two indices moved in the same direction 94% of the time over the past 15 years.

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How the Dow Jones Industrial Average works

The DJIA was created by Charles Dow and first published in 1896. The index is calculated by summing the stock prices of all 30 companies and dividing the total by a factor that accounts for stock splits. That method biases the index toward higher-priced stocks; a 1% move in a $200 stock will affect the DJIA more than a 1% move in a $50 stock.

Though the Dow is frequently cited in the press, you will be more diversified if you invest in a broader index, such as the S&P 500 or the Russell 3000 (which includes mid- and small-cap stocks).

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The stocks within the DJIA have changed only 57 times since its beginning in 1896. General Electric was the last original index component until it was removed in 2018.

About the Editorial Team

Sam Levine has over 30 years of experience in the investing field as a portfolio manager, financial consultant, investment strategist and writer. He also taught investing as an adjunct professor of finance at Wayne State University. Sam holds the Chartered Financial Analyst and the Chartered Market Technician designations and is pursuing a master's in personal financial planning at the College for Financial Planning. Previously, he was a contributing editor at BetterInvesting Magazine and a contributor to The Penny Hoarder and other media outlets.

Dayana Yochim is a former Senior Writer/Editor at Reink Media Group who has written about personal finance and investing for more than 20 years. Her work has appeared in outlets including HerMoney.com, NerdWallet and the Motley Fool, and has been syndicated nationally. Dayana has also been a guest expert on "Today" and Good Morning America.

Carolyn Kimball is a former managing editor for StockBrokers.com and investor.com. Carolyn has more than 20 years of writing and editing experience at major media outlets including NerdWallet, the Los Angeles Times and the San Jose Mercury News. She specializes in coverage of personal financial products and services, wielding her editing skills to clarify complex (some might say befuddling) topics to help consumers make informed decisions about their money.

What Is the Dow Jones Industrial Average?

About the Dow Jones Industrial Average

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How the Dow Jones Industrial Average works

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About the Editorial Team