How to invest in the Dow
Editorial staff, J.P. Morgan Wealth Management
- In 1896, Charles Dow and Edward Jones created the Dow Jones Industrial Average (the Dow).
- The Dow is a stock market index tracking the 30 largest U.S. companies.
- While you can’t invest directly in the Dow, you can gain exposure through exchange-traded funds (ETFs) and mutual funds or by purchasing the individual stocks that make up the market index.
What is the Dow?
In 1896, the Dow Jones Industrial Average (the Dow) was created by Charles Dow and his business partner, Edward Jones. The Dow is a stock market index tracking 30 of the largest U.S. companies, though it started out with just 12. It’s the second-oldest index after the Dow Jones Transportation Average.
Charles Dow added an additional eight stocks to the index in 1916, and the final 10 stocks joined the lineup in 1928. Even though it only represents a small portion of the stock market, the Dow is often seen as a benchmark for the overall health of the U.S. economy.
What kinds of companies are in the Dow?
Initially, the Dow was composed of industrial stocks, but its composition has changed over time. It currently tracks large, well-known companies often called blue-chip stocks.
As of 2025, the dominant types of companies included in the Dow are in these sectors:
- Technology
- Financial
- Health care
- Consumer goods
- Industrials
- Energy
- Retail and media
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Requirements for Dow inclusion
The Dow is a price-weighted index, meaning stocks with higher share prices have greater influence on the index's performance, regardless of the company's overall size. Since it’s not a market-weighted index like the S&P 500, the Dow doesn’t take a company’s market capitalization into account.
The Averages Committee – also known as the S&P Dow Jones Indices Averages Committee – is responsible for maintaining the Dow and determining when new stocks are added to the index. There’s no strict set of criteria a company must meet, but the committee looks at the following factors:
- Is it a non-transportation and non-utility stock (the Dow Jones Transportation Average and Dow Jones Utility Average track these)?
- Is it a blue-chip company?
- Does it have a strong reputation and history of sustained growth?
- Has the stock had strong interest from many investors?
- Is it U.S.-incorporated and headquartered?
The composition of the Dow changes periodically as companies are added or removed based on these criteria. When changes occur, they often reflect broader shifts in the American economy.
Can you invest directly in the Dow?
You can’t invest directly in the Dow, but there are several ways to invest in the companies that make up the index.
ETFs and mutual funds with exposure to the Dow
ETFs and mutual funds comprise a basket of assets that may include stocks. Some ETFs and mutual funds offer exposure to companies in the Dow while providing diversification. If you’re investing in an ETF or mutual fund, you want to make sure the composition of the whole fund makes sense as a part of your larger investment portfolio.
Index funds that track the Dow
Dow index funds are investment funds that aim to replicate the performance of the Dow by investing in the same 30 companies in the index. Index funds can be structured as ETFs or mutual funds.
Individual stocks
When you buy a stock, you’re purchasing a share of ownership in that company. So instead of investing in an ETF or index fund tracking the Dow, you could buy shares of one of the stocks included in the Dow as a way to gain exposure to the index.
How much does it cost to invest in the Dow?
As covered above you can’t invest directly in the Dow. The cost to gain exposure to the Dow index will depend on what you decide to invest in. If you purchase individual stocks, the cost will depend on the price of each stock. The same is true for investing in ETFs and mutual funds that track the Dow or have exposure to the Dow.
One other thing to keep in mind is that some brokerages allow for the purchase of fractional shares of stocks or ETFs, which may enable you to gain exposure to the Dow with a relatively small amount of money. Some brokerages have low minimums from $1 to $5 to buy a fractional share of a stock or ETF.
The pros and cons of investing in the Dow
When deciding whether to gain investment exposure to the Dow, just like with any investment decision, it’s important to weigh the pros and cons.
What are the potential benefits of investing in the Dow?
Investments with a relationship to the Dow index may offer the following advantages:
- Sector diversification: The Dow provides exposure to multiple economic sectors, including technology, health care, financial services, consumer goods and industrials.
- Blue-chip stocks: The Dow tracks companies with strong balance sheets, solid reputations and a global market presence. Every company included in the Dow has a track record of stable earnings and growth.
- Historical performance: The Dow has delivered solid long-term returns, even when accounting for dividends and inflation. The market will always experience periods of growth and decline, and the Dow has historically demonstrated resilience through various economic cycles.
- Dividends: Some companies whose stocks are included in the Dow offer regular dividend payments.
What are the disadvantages of investing in the Dow?
Despite its history of strong returns, there are some potential disadvantages to investing in companies or funds related to the Dow to consider.
- Small representation of companies: The Dow’s small sampling of companies is one of the biggest criticisms leveraged against it. With only 30 stocks, some argue that the Dow is too small to represent the entire U.S. stock market and economy. In comparison, the S&P 500 Index tracks 500 U.S. companies, providing a more comprehensive market view.
- Price-weighted methodology: The Dow's price-weighting system means that higher-priced stocks have more influence on the index, regardless of the company's actual size or economic importance. Some argue that a market-weighted index provides a more accurate market representation.
- Doesn’t factor dividend payments: The Dow is calculated and weighted based on the share prices of the 30 stocks in the index. Some see this as potentially misleading if some of the companies in the index have added value because they offer dividend payments to investors.
- Skewed toward large, established companies: The Dow exclusively contains large, established companies, providing no exposure to small or mid-sized businesses that may offer higher growth potential. All Dow companies are based in the U.S., so it provides no global exposure.
- Committee selection: Any new companies added to the Dow are chosen by a committee. Though the committee has criteria it looks for, there are no strict guidelines. This process has caused some experts to have concern over the possibility of bias or manipulation regarding the addition or subtraction of companies into the Dow.
How to start investing in the Dow
Let’s look at the steps you’d need to take to start investing in companies or funds related to the Dow.
1. Open a brokerage account
To invest in the Dow in some way, you’ll need to open a brokerage account. Once your account is set up, you’ll be able to transfer funds from your bank account into the brokerage account so you’re ready to begin investing.
2. Decide on your investment approach
Next, you’ll need to decide how you want to gain investment exposure to the Dow. For example, you’ll want to decide if you want to invest in an index fund tracking the performance of the Dow or in individual stocks of companies in the Dow. Once you’ve decided on an approach that meets your needs, you’ll execute a purchase order.
3. Monitor your investments and adjust as needed
After submitting the trade, you’ll officially have investment exposure to the Dow. To keep your investment on track, monitor your portfolio regularly.
The bottom line
Investing in companies or funds with a relationship to the Dow index provides exposure to some or all of the 30 of the most established companies in the U.S with a proven track record of strong returns.
For beginner investors, ETFs, including index funds, can be a straightforward and cost-effective approach to Dow investing. Investing in individual stocks within the Dow may be an option for more advanced investors with specific objectives. If you’re unsure of what strategy you should take, seeking guidance from a financial advisor can be helpful.
Regardless of your approach, it’s a good idea to understand how to gain investment exposure to the Dow and its limitations. Any investment strategy you choose should align with your risk tolerance, timeline and financial goals.
Frequently asked questions about investing in the Dow
How much money you need to gain exposure to the Dow varies depending on your investment strategy. If you’re purchasing full shares, you’ll need enough money to purchase at least one share of an ETF or stock.
You can gain exposure to the Dow with less by buying fractional shares, which involves purchasing less than a full share. However, not every brokerage firm offers fractional share investing, and even if they do, it may not be available to all customers.
Changes to the Dow occur pretty infrequently and usually follow major corporate events like mergers or bankruptcies. Change could also be due to shifts in the economic landscape.
The Dow itself is just a market index and doesn't pay dividends. However, ETFs and mutual funds that follow the Dow may distribute dividends at regular intervals. When investing in individual Dow stocks, you'll receive dividends directly from each company according to their payment schedules if they offer dividends.
Historically, the Dow has sometimes underperformed broader indices like the S&P 500, particularly during periods when technology and growth stocks outperform traditional industrials. However, during certain market cycles, the Dow's blue-chip focus has provided better downside protection.
Yes, you may be able to invest in Dow-focused ETFs, mutual funds or stocks through IRAs, 401(k)s and other retirement accounts, depending on the account’s offerings.
The main difference is that the Dow tracks 30 stocks while the S&P 500 includes approximately 500. The Dow is also price-weighted, while the S&P 500 is weighted by market capitalization. Finally, the Dow focuses exclusively on large, blue-chip companies, while the S&P 500 includes large- and mid-cap companies.
Investments offering Dow exposure are generally considered moderate in terms of risk profile. It may be considered a more conservative approach than investing in small-cap stocks or emerging markets but more aggressive than bonds or money market funds.
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Editorial staff, J.P. Morgan Wealth Management
