S&P 500 vs Dow Jones
Two American indices built on opposite principles. The S&P 500 weights its five hundred companies by market capitalisation; the Dow Jones follows only thirty and weights them by share price — a convention inherited from the nineteenth century, which gives more influence to an expensive share than to a large company.
Over the period both series share, S&P 500 comes out ahead at +8.8% a year.
| Asset | Total return | Annualised | Volatility | Largest drawdown |
|---|---|---|---|---|
| S&P 500 | ×18.5 | +8.8% a year | 15.6% | −54.7% (March 2009) |
| Dow Jones Industrial | ×16.5 | +8.4% a year | 15.1% | −52.0% (March 2009) |
Figures calculated on 26/10/2026 from monthly closing prices. Past performance is no guide to future performance.
Weighting by price or by size
In the S&P 500 a company counts in proportion to its market value: the largest companies drive most of the index’s movement, which matches what an investor buying the whole market would hold.
In the Dow Jones a company counts in proportion to the price of one of its shares. A company whose shares trade at six hundred dollars weighs three times as much as one trading at two hundred, even if the second is ten times the size. A share split, which changes nothing about the company’s value, changes its weight in the index.
Thirty companies, chosen by hand
The Dow’s composition is not the output of a mechanical rule: a committee decides what goes in and what comes out, aiming to represent the American economy. The S&P 500 follows published criteria — size, liquidity, profitability — though a committee settles the borderline cases there too.
For all that separates them, the two curves stay close over long periods: thirty very large American companies are enough to reproduce most of what five hundred do. The gaps open mainly when a sector over-represented in one of them leads the market.
Frequently asked questions
Why is the Dow still quoted everywhere?
Seniority: created in 1896, it is the oldest stock index still published. Professionals prefer the S&P 500, which they consider more representative.
Are thirty companies enough?
To follow the general trend, easily. To measure the performance of a diversified portfolio, the S&P 500 remains the benchmark.