If you have a bunch of different stocks or are savvy in stock trading then you likely monitor the S&P 500 or honestly they usually just monitor their own personal stocks.

Then you have those who just have a 401-K or mutual fund that has a heavy portion of US Stocks then honestly your best bet is not to monitor it at all since you are not buying and selling based on what the market is doing but going for the long run. It will save you a lot of pain and suffering especially right now just to know what you do not sell does not hurt you until you actually do sell.

But to understand the difference. The DOW makes up 30 large stocks that provide an indication of what the overall economy is doing from a stock perspective. The DOW represents 22%ish of the entire stock market capitalization. What is stock market capitalization? Quite simply, it is the total # of stocks outstanding x the current price for each share of stock. Basically the value of the company as determined by stock.

So, the total value of the stock market as of 12/31 was 53 Trillion so the DOW represents about 12 trillion dollars in stock.

Now, the DOW is great for the overall economy but the S&P 500 is made up of the leading 500 US traded companies and by the way the 30 companies the DOW covers are all in the S&P 500.

So, the S&P  500 represents 79% of the total value of the US Stock Market which is about 42 Trillion as of 12/31. Less today of course but the %’s are about the same.

So, what do you do with this information? Like I say almost daily use it to help others see you as the person in the know for the financial industry and use it in conversations to set yourself apart from the rest.