The Dow gets its name from Charles Dow, the man who first created it in 1897. In the beginning, Mr. Dow made a list of the 11 most prosperous and most widely traded stocks on the market. Currently, the Dow is made up of 30 stocks, chosen by the editors of the Wall Street Journal (which is owned by Dow Jones and Company).

But what are the criteria for determining what the “best” stocks are? The stocks included in the Dow are generally from large, stable companies that are considered to be among the most successful, but there is a mathematical formula to go on. The basic formula involves adding up the prices of all the stocks in a given index (collection of stocks) of a particular corporation, then dividing by the total number of stocks in that index – in other words, finding the average price of a stock for that index. Today, however, the editors at WSJ actually divide by a higher number in order to adjust for stock splits (when a company multiplies the amount of shares it has).