Dow Jones Index Funds: Blue-Chip Investing
The Dow is the most famous index and one of the strangest: 30 hand-picked stocks weighted by share price, not company size. DIA is how you buy it — but understand its quirks first.
Don't have time? Here's what you need to know:
- 1The Dow holds just 30 committee-chosen blue-chip stocks — tiny and narrow next to the S&P 500's ~500 or a total-market fund's thousands.
- 2It's price-weighted, an antiquated 1890s method where share price (not company size) sets influence, producing counterintuitive results.
- 3DIA (~0.16%) is a functional blue-chip fund, but an S&P 500 fund like VOO offers broader, cheaper, more representative exposure.
- 4Don't choose a Dow fund just because it's the number on the news; for a core U.S. holding, a cap-weighted broad fund is the better default.
The Most Famous Index Is Also the Oddest
The Dow Jones Industrial Average is the index you hear quoted on the evening news, but it's built in a way almost no modern index is. It contains just 30 large, established "blue-chip" U.S. companies, hand-selected by a committee — a tiny, curated list compared with the S&P 500's roughly 500 names or a total-market fund's thousands.
Stranger still, the Dow is price-weighted, not market-cap-weighted. A stock's influence on the index depends on its share price, not the size of the company. That's an antiquated method dating to the 1890s, and it produces some genuinely counterintuitive results. The main fund tracking it is DIA, the SPDR Dow Jones Industrial Average ETF, nicknamed "Diamonds."
Why Price-Weighting Is So Strange
In a price-weighted index, a company with a $400 share price has far more sway than one with a $40 share price, even if the second company is worth many times more in total. Share price is partly an accident of how many shares a company has issued and whether it has ever split its stock, so it bears no necessary relationship to a company's actual size or importance.
The practical upshot is that the Dow can be driven by a handful of high-priced stocks that aren't even the largest companies, while genuinely massive firms with lower share prices have surprisingly little influence. Virtually every other major index — the S&P 500, the Nasdaq-100, the Russell 2000 — weights by market value instead, precisely because price-weighting is hard to justify on any economic logic.
| Dow (DIA) | S&P 500 (VOO) | |
|---|---|---|
| Number of stocks | 30 | ~500 |
| Weighting method | By share price | By market value |
| Selection | Committee-chosen | Rules-based, large-cap |
| Diversification | Narrow | Broad |
| Expense ratio | ~0.16% | ~0.03% |
Dow vs S&P 500: Which Better Represents the Market
Despite the Dow's fame, the S&P 500 is the far better gauge of the U.S. stock market. With 500 companies weighted by their actual market value, it captures a much broader and more representative cross-section, which is exactly why professional investors benchmark to the S&P 500 rather than the Dow. The Dow persists mostly out of history and brand recognition.
Over long periods the Dow and the S&P 500 have produced broadly similar returns, since both are baskets of large U.S. companies — but the S&P 500 is the more sensible holding. For an investor choosing a core U.S. fund, an S&P 500 fund like VOO or a total-market fund like VTI offers more diversification at a lower cost than DIA.
Important: Don't pick a Dow fund just because the Dow is the number you see on the news. With only 30 price-weighted stocks, it's a narrower, quirkier index than a broad S&P 500 or total-market fund.
Ready to invest? Open an IBKR account in 10 minutes and get free stock. $0 commissions on US ETFs • Fractional shares from $1 • 150+ global markets.
When a Dow Fund Might Still Appeal
DIA isn't a bad fund — it's a perfectly functional way to own 30 high-quality, established companies, and it carries a reasonable (if not rock-bottom) expense ratio. An investor who specifically wants concentrated exposure to large, well-known blue-chip names, often with a tilt toward steady dividend payers, might find the Dow's roster appealing.
But for most people building a portfolio, the Dow's quirks make it a curiosity rather than a core. If you want broad U.S. exposure, a cap-weighted S&P 500 or total-market fund does the job better and cheaper. Think of DIA as a niche blue-chip play, not the default large-cap building block its fame might suggest.
Frequently Asked Questions
How many stocks are in the Dow Jones?
Just 30. The Dow Jones Industrial Average is a committee-selected list of 30 large, established U.S. "blue-chip" companies. That's tiny compared with the S&P 500's roughly 500 stocks or a total-market index fund's thousands, which is why the Dow is considered a narrow, less representative gauge of the overall market.
Why is the Dow price-weighted?
It's a holdover from the 1890s, when computing a simple average of share prices was practical. As a result, a stock's influence depends on its share price rather than the company's actual size, which can let a high-priced but smaller company sway the index more than a far larger one. Nearly all modern indexes weight by market value instead.
Is DIA or an S&P 500 fund better?
For most investors, an S&P 500 fund like VOO is the better core holding. It owns about 500 companies weighted by market value, giving far broader, more representative exposure at a lower expense ratio than DIA's 30 price-weighted stocks. DIA can appeal to those who specifically want concentrated blue-chip exposure, but it's a niche choice, not a default.
Does the Dow track the whole stock market?
No. With only 30 hand-picked, price-weighted stocks, the Dow is a narrow slice of large-cap America, not a broad market gauge. It's the most famous index because of history and media habit, but the S&P 500 or a total-market fund is a far better representation of how U.S. stocks as a whole are performing.
Further Reading
Free Tools
Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.