Ask a Fool: Which Stock Index Is the Best Representation of the Entire Market?
Out of the three, the S&P 500 index is probably the best indicator of how the stock market is performing, but there are even better choices out there.
The Dow Jones Industrial Average only considers 30 companies, and is a price-weighted index, which places more emphasis on stocks whose share prices are high, as opposed to weighting in favor of larger companies (as most other indexes do).
The Nasdaq Composite considers nearly 3,000 stocks listed on the Nasdaq, but it's important to realize that it is a very tech-heavy index. The technology sector makes up more than 40% of the Nasdaq, but makes up only about 20% of the overall market.
Source: Fool.com
