Why the Dow isn't the best stock index to follow

The Dow Jones industrial average is the most widely followed U.S. stock index, but it may not be the best barometer of the equity market out there.

First, the Dow consists of only 30 stocks. While they are some of the most well-known companies (Apple, American Express, Exxon Mobil and UnitedHealth, among others), experts say it's impossible to adequately represent the modern market with so few stocks.

Second, and probably the biggest issue concerning the Dow, is the fact that it's a price-weighted index. This means that a company with a stock price of $200 will have a greater impact on how the Dow trades than a stock worth $50 per share, regardless of its market value.

The S&P 500, on the other hand, is a much better representation of the overall stock market.

Check out the video above for more.