Officially the Dow Jones Industrial Average (DIJA), it’s sometimes known as just ‘The Dow’. Alongside the Nasdaq and the S&P 500, it’s a key indicator of US stock market performance and the health of the economy.
Unlike other indexes, the Dow Jones tracks only blue chip companies. These are large, well-established businesses, considered to be relatively stable and less volatile than other smaller or newer ones.
Most companies within the Dow Jones are household names and often multinational companies. They include:
Dow Jones companies are selected by a committee and reviewed periodically by S&P Dow Jones Indices. There aren’t strict guidelines for inclusion, but according to their methodology, a company must:
You can’t buy stock in the Dow Jones itself, but you can invest in exchange-traded funds (ETF) that aim to match its performance.
These ETFs track the Dow Jones and the collective performance of the 30 companies in the index. If the index rises or falls, the value of those ETFs does the same.
Explore: How do ETFs work?
The companies within the Dow may pay dividends. If you invest in an ETF or mutual fund that tracks the index, you'll receive any dividends based on how many shares you hold.
You may have to pay dividend tax on the dividends you earn. To find out if that’s the case, check your dividend allowance and tax band.
You can’t buy stock in the Dow Jones index directly, but you can get exposure to it in 2 ways.
You could buy shares in some or all the 30 companies on the Dow Jones. You’d have to buy and manage them separately, as individual stocks.
Buying shares in an ETF is simpler than investing in individual companies, with fewer transaction fees. ETFs also offer diversification, as you’re effectively spreading your investment across multiple companies at once, which helps spread risk.
If you have an online share dealing account with us, you can see the ETFs we offer by selecting ‘Exchange Traded Funds’ from the ‘Market Data’ section in the top navigation. For existing HSBC UK customers only. Eligibility criteria and fees apply.
The value of investments can go up and down, and you may get back less than you invest.
Investing should be also seen as a medium to long-term commitment. You should be prepared to invest for at least 5 years to give your money a chance to grow.
Ideally, you should have an emergency fund of at least 3 months’ living expenses before you invest. That way, you won't have to sell your investments too early if you need the money.
