Understanding the Dow Jones Industrial Average (DJIA)

There are several ways investors and financial professionals track the performance of the stock market and economy. One of them is by monitoring market indexes. Among the most famous — and oldest — is the Dow Jones Industrial Average (DJIA), which tracks many of the most successful publicly traded corporations and conglomerates in the United States.

In this article, we’ll detail how the DJIA works and why it’s commonly used as a benchmark for how well the market is doing, including some of its pitfalls when being used in this manner. We also include a full list of the businesses on the index, and how you could go about adding representation of its constituent companies, known as components, to your portfolio.

What Is the Dow Jones Industrial Average?

The DJIA, or Dow, is a longstanding, well-known stock market index. Established in 1896, it tracks the 30 largest, blue-chip companies weighted by price in the U.S. on exchanges such as the New York Stock Exchange (NYSE) or Nasdaq. It is overseen by S&P Dow Jones Indices.

The DJIA often serves as an indicator of the financial health of each of the largest, most valuable companies in the country. However, while it can help one assess the performance of the overall market, the DJIA tends to draw criticism for its accuracy.

One reason for this is that it’s a price-weighted index, meaning that the companies with higher stock prices hold the most weight or value. Therefore, in some cases, a company may hold more weight in the index simply due to having a higher share price, even if its market cap is relatively low. Other indexes, such as the S&P 500, use market capitalization (cap) — the total market value of a corporation’s outstanding shares — as a weighting factor. These are generally considered more reflective of the economy’s performance.

Another reason the DJIA may not accurately mirror the overall market is its relatively small size as compared to other, broader indexes, like the S&P 500 or the Russell 3000. Since the Dow Jones only holds 30 companies, it might not fully represent the diversity present in the greater market.

Companies in the Dow Index

The Dow Jones originally began with 12 companies, particularly in industries such as agriculture, oil, and gas — sectors that were highly important to Americans near the turn of the 20th century. Today, there are 30 companies listed on the Dow Jones Industrial Average, many of them household names or conglomerates of brands we often use in our daily lives. They range from manufacturing companies to tech giants.

Companies in the transportation or utilities industries aren’t eligible, however. Rather, they fall within separate indexes such as the Dow Jones Transportation Average (DJTA) and Dow Jones Utility Average (DJUA).

Below is a complete list of the companies on the DJIA, as of February 2024:

Company	Ticker Symbol	Year Added
3M	MMM	1976
American Express	AXP	1982
Amgen	AMGN	2020
Amazon	AMZN	2024
Apple	AAPL	2015
Boeing	BA	1987
Caterpillar	CAT	1991
Chevron	CVX	2008
Cisco	CSCO	2009
Coca-Cola	KO	1987
Disney	DIS	1991
Dow	DOW	1991
Goldman Sachs	GS	2019
Home Depot	HD	1999
Honeywell	HON	2020
IBM	IBM	1979
Intel	INTC	1999
Johnson & Johnson	JNJ	1997
JPMorgan Chase	JPM	1991
McDonald’s	MCD	1985
Merck	MRK	1979
Microsoft	MSFT	1999
Nike	NKE	2013
Procter & Gamble	PG	1932
Salesforce	CRM	2020
Travelers	TRV	2009
UnitedHealth Group	UNH	2012
Verizon	VZ	2004
Visa	V	2013
Walmart	WMT	1997

Investing in the Dow Jones

Because The Dow comprises a select number of the most valuable and successful companies in the nation, it makes sense to try and add them, or a piece of them all, to your portfolio in some way. Here are some effective methods of investing in the DJIA or its components:

Exchange-Traded Funds (ETFs)

ETFs are a type of investment vehicle that often track broad market indexes, such as The Dow. When you buy shares in one, you own an indirect piece of each company housed within. And, if it’s passively managed, the fund will closely follow the performance of the index through both ups and downs.

A commonly cited ETF that closely matches the DJIA is the SPDR Dow Jones Industrial Average (DIA), offered by State Street Global Advisors (SSGA). There are other funds, however, that seek to surpass The Dow’s performance through active management. One example is the ProShares Ultra Dow30 (DDM), a leveraged ETF that aims to double the daily performance of the DJIA.

According to the S&P Dow Jones Indices, below is a list of DJIA ETFs in the U.S. (including the two mentioned above):

• ProShares Short Dow30 (DOG)
• ProShares Ultra Dow30 (DDM)
• ProShares UltraPro Dow30 (UDOW)
• ProShares UltraPro Short Dow30 (SDOW)
• ProShares UltraShort Dow30 (DXD)
• SPDR Dow Jones Industrial Average ETF Trust (DIA)

Individual Stocks

Another means of investing in Dow companies is buying individual stocks through a brokerage or retirement account. This allows you to hold a direct ownership stake in the companies, and thus add them to your investment portfolio. However, consider that it can be difficult and expensive, especially for novice investors. For this reason, we recommend speaking with a financial advisor before getting started.

Dow Jones vs. S&P 500

The Dow Jones Industrial Average and S&P 500 are both well-known and heavily tracked broad market indexes. This is because they both enable investors to monitor the performance of the economy, as well as which companies are the most important to American industry. The two, however, are not the same in terms of scope, size, and weighting.

The S&P 500 is much larger than the DJIA, including 500 successful public companies from several industries. On the other hand, the Dow Jones only includes 30 and excludes certain sectors, limiting its scope. Therefore, the more extensive size of the S&P 500 allows it to generate a more complete estimation of the overall market trajectory.

The two indexes also use different weighting factors. The S&P 500 uses a float-adjusted market cap weighting system, where corporations with more market cap hold the most influence over the index. Conversely, the DJIA relies on a price-weighted model, meaning that the companies with the highest share prices wield more value.

Frequently Asked Questions

What is the Dow Jones Industrial Average’s all-time high?

As of March 1, 2024, The Dow hit an all-time high on Friday, February 23, 2024, closing at 39,131.53 points. Keep in mind that this number is always changing, however. For the most up-to-date reading and a chart of its previous performance, we recommend visiting the S&P Dow Jones Indices website.

Who decides which companies are on the DJIA?

S&P Dow Jones Indices, an arm of S&P Global, manages the Dow Jones Industrial Average. The companies in the index are chosen by a committee. Many sources say that it includes individuals from both The Wall Street Journal and S&P Global; however, a list of the people on the committee, as well as the exact criteria for which companies make the cut, isn’t readily available.

Why is the Dow Jones so important?

The Dow Jones is important because it represents a shortlist of companies that hold industrial significance within the United States. As noted, many of them are brands and corporations that we’re familiar with and use consistently. Therefore, because it includes important corporations, many often look to it as a measuring stick for the market performance of the country.