Which is better? Dow Jones or S&P 500?

Not only does the DJIA represent only 30 large capitalization US stocks, it is also price-weighted. this means that higher priced stocks are overrepresented in the 30 stock index. Compared to the S&P's market cap methodology, that gives greater weighting to bigger stocks, as Enk Loui mentioned. S&P has also consistently outperformed the Dow since 1957.

The DJIA only contains 30 component companies, compared to the 500 companies in the S&P 500. There exists a high degree of correlation due to the similar component companies of each index. The DJIA contains only very large companies. Most of these companies are also included in the S&P 500. Since the S&P 500 is constructed by the weighted average market cap, larger companies have a greater influence on movement in the index.

However, the S&P 500 is considered to be more diversified compared to the DJIA, as the S&P 500 comprises of more stocks from industries such as consumer staples, telcos and healthcare.