how is the us 30 calculated 
the dow 30 isn t calculated like other leading indexes tasked with tracking the performance of the stock market its value is computed by adding up all the stock prices of its 30 components and dividing the sum by what is known as the dow divisor a number used to account for corporate actions such as stock splits mergers and dividend payments originally charles dow simply added up the closing prices of what he considered to be the 12 most important stocks on wall street and divided the result by 12 to arrive at an average the dow 30 is also price weighted meaning it places great emphasis on share prices rather than market capitalization essentially the higher or more expensive the share price the larger a company s weighting in the index is 1the us 30 and the s p 500comparisons are often made between the dow jones industrial average djia and the s p 500 while both use the same strategy of measuring stock market performance through representative companies there are significant differences in their methodology for example the djia is price weighted while the s p 500 is market capitalization weighted they also use significantly different criteria to include companies in their listings 5moreover the s p 500 is preferred by some simply because it reflects the performance of 500 major companies rather than just 30 disadvantages of the us 30many critics of the dow argue that it does not significantly represent the state of the u s economy as it consists of only 30 large cap u s companies they believe the number is too small and neglects companies of different sizes many critics believe the s p 500 is a better representation of the economy as it includes significantly more companies 500 versus 30 which by nature is more diversified furthermore critics believe that factoring only the price of a stock in the calculation and not its market cap does not accurately reflect a company s performance it gives a company with a higher stock price but a smaller market cap more weight than a company with a smaller stock price but a larger market cap 