What Is The Dow Jones Industrial Average?
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Like the Swiss Market Index (SMI), the Dow Jones is a price index. The shares included in it are weighted according to price; the index level represents the average of the shares included in it. The offers that appear on this site are from companies that compensate us. But this compensation does not how to choose the best architecture for your web application influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. The Dow 30 isn’t calculated like other leading indexes tasked with tracking the performance of the stock market.
The DJIA was designed to serve as a proxy for the health of the broader U.S. economy. Often referred to simply as the Dow, it is one of the most-watched stock market indexes in the world. While is cryptocurrency a good investment the Dow includes a range of companies, all of them can be described as blue-chip companies with consistently stable earnings. The Dow Jones Industrial Average (DJIA) is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and Nasdaq. The Dow Jones is named after Charles Dow, who created the index in 1896 along with his business partner, Edward Jones.
They included the oldest index, the Dow Jones Transportation Average, which tracks 20 transportation companies, such as airlines and delivery services. Another major index is the Dow Jones Utility Average, which tracks 15 U.S. utility stocks. The value of the index can also be calculated as the sum of the stock prices of the companies included in the index, divided by a factor, which is approximately 0.152 as of April 2024[update]. The factor is changed whenever a constituent company undergoes a stock split so that the value of the index is unaffected by the stock split. The DJIA launched in 1896 with just 12 companies, primarily in the industrial sector. Since then, it’s changed many times—the very first came three months after the 30-component index launched.
The Dow Jones Industrial Average, also known as the DJIA or simply the Dow, is a market index frequently used to gauge the overall performance of the U.S. stock market. Originally, Charles Dow simply added up the closing prices of what he considered to be the 12 most important stocks on Wall Street and divided the result by 12 to arrive at an average. These ETFs give investors the chance to buy a stake in 30 of America’s largest, most significant publicly-owned companies. These are blue-chip stocks with big customer bases, steady revenues and profits, and excess cash. It is easy to confuse Dow Jones with the Dow Jones Industrial Average (DJIA).
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The companies in the Dow provide many jobs and its goods and services are used by many if not most Americans. The table below alphabetically lists the companies included in the DJIA as of June 2024. Dow Jones & Company is the firm founded by Charles Dow, Edward Jones, and Charles Bergstresser in 1882, not the people themselves. Charles Dow and Edward Jones ran the company themselves in the early years and built a reputation for integrity. When Dow died in 1902, Clarence Barron and Jessie Waldron bought the company, and control eventually passed to the Bancroft family. In 2007, News Corp. purchased Dow Jones & Company from the Bancrofts.
How Does the DJIA Compare to Other Indices?
The Dow 30 was developed as a means of tracking the overall performance of the U.S. stock market in an age when information flow was relatively limited. The idea was to let ordinary investors know which direction the market was heading. When the media reports that the stock market is up or down for the day, they mean the US 30. Its movements are used as a proxy for the overall performance of the stock market. In many people’s eyes, the US 30 is a barometer of the U.S. stock market and economy. The Dow Jones Industrial Average groups together the prices of 30 of the most traded stocks on the New York Stock Exchange (NYSE) and the Nasdaq.
Quality as a proxy of the stock market
Also referred to as the Dow 30, the index is considered to be a gauge of the broader U.S. economy. The Dow’s approach is unlike other leading indexes used to track the overall performance of the stock market, like the S&P 500 or the Nasdaq Composite. These consider a company’s market capitalization when determining how much influence it will have in an index.
The index is price-weighted and dates back to 1896, making it one of the oldest stock market indexes. It’s not as diversified as broader indexes like the S&P 500, but it still provides a picture of how the stock market and large businesses are performing. For example, Apple is one of the largest companies in the world and, as of February 2024, has the second-largest weight in the market-cap-weighted S&P 500 based on its market cap of $2.83 trillion. But in the Dow, it has just the 15th largest weight, which is based on its share price of about $183.
When Did the DJIA Top 10,000 for the First Time?
The index, however, only has 30 companies, and the index itself is price-weighted, meaning that it does not always present an accurate reflection of the broader stock market. The Dow Jones Industrial Average, also known as the Dow, is one of the most popular stock market indexes, along with the S&P 500 and Nasdaq Composite. The Dow tracks the stock performance of 30 large, blue-chip companies.
Alternately, Cisco Systems and Coca-Cola are among the lowest-priced stocks in the average and have the least sway in the price movement.[84] Critics of the DJIA and most securities professionals[who? ] recommend the market-capitalization weighted S&P 500 Index or the Wilshire 5000, the latter of which includes most publicly listed U.S. stocks, as better indicators of the U.S. stock market. The Dow tracks the stock performance of 30 blue-chip, American companies.
- They included the oldest index, the Dow Jones Transportation Average, which tracks 20 transportation companies, such as airlines and delivery services.
- Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional.
- An index tries to model a particular industry or market—or even entire national economies.
- The US 30 was created by journalist Charles Dow and his business partner Edward Jones in 1896.
- In the course of its lengthy history, its holdings have changed just 60 times, or about an average of every two years.
- The Dow tracks the stock performance of 30 blue-chip, American companies.
The Dow Jones Averages are owned forex major pairs currency pair characteristics by S&P Dow Jones Indices LLC, a joint venture between S&P Global and the CME Group. The Dow Jones Industrial Average hit 10,000 for the first time in March 1999. The DJIA then hit 11,750 in January 2000, before falling to below 7,200 in October 2002 after the dot-com crash. “The current choppiness will prove to be just that, not the sign of a new bear market,” Ned Davis Research said.
The ten components with the largest dividend yields are commonly referred to as the Dogs of the Dow. As with all stock prices, the prices of the constituent stocks and consequently the value of the index itself are affected by the performance of the respective companies as well as macroeconomic factors. As the economy changes over time, so does the composition of the index. A component of the Dow may be dropped when a company becomes less relevant to current trends of the economy, to be replaced by a new name that better reflects the shift.