Chances are you’ve heard financial news reports talk about “the Dow.” They’re referring to the Dow Jones Industrial Average (DJIA),1 one of the oldest and most closely watched stock market indexes. The good news is you don’t need to be a financial pro to understand how it works. So what is the Dow Jones? Here’s more on this benchmark stock market index.
What is the Dow Jones?
The Dow Jones is a stock market index that tracks 30 large, well-established companies across many industries, including finance, technology, and pharmaceuticals. Instead of looking up each company’s stock performance individually, investors can simply refer to the Dow, which uses one number to summarize how the index as a whole is doing. It’s 1 of 3 major US stock market indexes, the others being the S&P 500®2 and the Nasdaq Composite.3
How does the Dow Jones Industrial Average work?
The Dow Jones Industrial Average is a price-weighted average, meaning that higher-priced stocks have a greater effect on the DJIA number. So arriving at the average is not as simple as adding up each company’s share price and dividing by 30 (the number of companies in the index).
Instead, the DJIA number comes from the combined value of all the share prices in the index divided by a divisor that’s subject to change. That number is based on factors that affect share value, like mergers and stock splits, where a single share is divided into multiple shares, lowering the per-share price but not the total value of all shares. This divisor is 0.163 as of July 25, 2025.4 Whatever the divisor is at the time, if most of the index’s stocks rise in price, so does the Dow’s value. The opposite is also true.
DJIA vs. other major indexes
Now that you read how the Dow works, here’s how it compares to other major stock market indexes.
DJIA vs. S&P 500
The S&P 500® also tracks the performance of large US companies, but it includes roughly 500 stocks, some of which overlap with Dow stocks. Since the S&P 500 has more stocks, it provides a broader view of the entire market.
While the Dow is most affected by stock prices, the S&P 500 prioritizes market capitalization, or the total value of its outstanding stock. Companies with larger market capitalizations make a bigger impact on the S&P 500, whereas companies with higher stock prices drive the Dow.
DJIA vs. Nasdaq
The Nasdaq Composite is an index that represents the performance of stocks listed on the Nasdaq stock market exchange. Like the S&P 500, the Nasdaq Composite uses a market capitalization-weighted average instead of the price-weighted average the DJIA uses. More differences: The Nasdaq Composite currently tracks more than 3,500 stocks of various sizes, and there’s a strong focus on technology companies. The DJIA, on the other hand, tracks only 30 large companies from a variety of industries.
DJIA vs. Russell 2000
The Russell 20005 tracks the performance of small-capitalization stocks. These are companies with total outstanding share values on the lower side. This index starts by looking at the Russell 3000, which lists 3,000 US companies that represent almost all of the investable equity market. The Russell 2000 summarizes the performance of the 2,000 smallest companies on that index and is market capitalization-weighted. Conversely, the DJIA tracks just 30 large-capitalization stocks and is price weighted.
DJIA vs. Global Dow
There’s also an index that focuses on companies around the world. It’s called the Global Dow, and it tracks the performance of 150 companies from international markets. Although it was also created by the Dow Jones company, the Dow, their flagship US index, only includes 30 domestic stocks.
What companies are in the Dow Jones?
The Dow focuses on well-known blue-chip companies that are industry leaders and have sustained growth and wide investor interest. As of July 2025, the following companies are listed on the Dow:
- 3M
- Amazon
- American Express
- Amgen
- Apple
- Boeing
- Caterpillar
- Chevron
- Cisco Systems
- Coca-Cola
- Goldman Sachs Group
- Home Depot
- Honeywell International
- IBM
- Johnson & Johnson
- JPMorgan Chase
- McDonald’s
- Merck
- Microsoft
- Nike
- NVIDIA
- Procter & Gamble
- Salesforce
- Sherwin-Williams
- Travelers Companies
- UnitedHealth Group
- Verizon Communications
- Visa
- Walmart
- Walt Disney
Why is the Dow Jones Industrial Average important?
Because the Dow Jones Industrial Average condenses top companies’ performance into one number, investors get a quick and easy-to-understand view of what’s happening in the US stock market. For this reason, it’s one of the most looked-at stock benchmarks.
Some might question whether an index with only 30 companies can give enough insight into the stock market as a whole. For some context, in March 2020—as the COVID-19 pandemic took hold—the Dow fell nearly 3,000 points in a single day.6 But the market later rebounded, and the Dow went on to reach record-breaking heights. This was similar to how the entire stock market performed on average.
Historical performance of the Dow Jones
From June 2015 through June 2025, the DJIA has had an annualized return of 12.1%.7 During this same period, the S&P 500 came in around 13.6%.8 The Nasdaq Composite saw an annualized return of 15.2% from July 2015 through June 2025.9 These numbers account for tough market years that happened during this period, like in 2022, when many stocks lost value. Still, during this time frame, the companies on the Dow Jones index experienced smaller losses than other indexes—underscoring that while the Dow is often viewed as an overall market benchmark, performance can diverge. The Dow fell by 8.9% in 2022—versus a loss of over 19% for the S&P 500 and over 33% for the Nasdaq.10
The main takeaway is that the stock market can be volatile. Investors can expect ups and downs along the way, but the Dow has a track record of steady long-term gains. Of course, past performance is no guarantee of future results.
How to invest in the DJIA companies
While you can’t invest in the Dow index directly, you could invest in funds that seek to replicate the index’s performance. Here are the steps to take:
- Open an investment account
To invest in stocks, you’ll need either a taxable brokerage account or a tax-advantaged account, like a retirement account. If you don’t already work with a broker, here’s what to look for in a brokerage as you compare your options.
- Fund your account
Move money from a bank account into your investment account, so you have dollars to invest.
- Choose how you want to invest
You could buy shares of all 30 companies on the DJIA, though this would be time consuming. Another option if you want to invest in DJIA companies is to buy shares of a fund, like an exchange-traded fund (ETF), that tracks the Dow. This could offer exposure to all 30 companies with a single investment. Just be aware of any fees the fund charges.
- Place your trade
Once you decide what to invest in, decide how much money you’d like to invest and buy the investment.