History
At the end of the 19th century, the stock market did not have any indicators that could describe all the processes that take place there every day. Some advanced investors preferred to use fixed-rate bonds, which would guarantee minimal risk. At the same time, common stocks were considered an unreliable way to make a profit (partly due to the huge number of speculators).
In order to streamline the situation on the market a little, Charles Dow (one of the Dow Jones & Company`s founders) developed a special index — the shares of 12 large companies that belonged to influential state-owned railway corporations were used to compile it. Later, the formula was improved, Dow Jones historical index included 20 companies.
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From October 1896, it began to be published annually in The Wall Street Journal. However, the general industrial index appeared much later, after the death of its creator — in 1929.
What is the Dow Jones Index in detail?
At the moment, the Dow Jones Industrial Average is one of the oldest parameters. Starting with 12 and later 20 companies, now his formula is based on 30 companies. This index allows you to fairly accurately track the state of the financial market and is actively used not only in the United States, but also in the economy of the whole world. A host of market analysis platforms present the Dow Jones index live with actual changes — modern investors can track the state of the economy efficiently and at any time.
That’s why if a customer wants the most reliable financial information in 2022, then Dow Jones & Company is considered an excellent source. What’s more, the brand isn’t limited to publications, as it also provides key nuances with links to Barron’s, MarketWatch and, of course, The Wall Street Journal.
An interesting fact is that at the moment the company is not the main regulator of the index of the same name, which was created more than 100 years ago. At the moment it belongs to the enterprise of Dow Jones Indices LLC.
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The Dow Jones Industrial Average (DJIA)
To make the most of the index, you should understand that Dow Jones and Dow Jones Industrial Average are not the same thing. Generally, the DJIA is often referred to simply as “Dow” for short. It is undeniably the most important stock index in the world, and the Dow Jones companies list includes world leaders such as Microsoft, Boeing, Coca-Cola and Apple.
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Previously, it consisted mainly of large industrial brands that sold energy, tobacco, cotton, sugar, or were engaged in the construction of the railway, but time has made adjustments. And by the way, this is the main reason for the demand for this index — many financial experts say that the state of the country’s industry directly affects the state of the entire economy. Of course, the economy now depends on a complex of different factors, but the DJIA is still considered an indicator of its “health”.
Important! The index is considered fairly stable and rarely changes. However, if changes are made, then the total number of enterprises in the brand remains 30.
However, the DJIA is not the only important index of the company, it also has other interesting ones that allow customers to describe the performance of other economic sectors. For example, the Dow Jones Transportation Index, which includes 20 well-known transportation organizations (providing air transportation & delivery services), or the Dow Jones Utility Average, based on data from 15 utility sector companies.
When discussing the importance of this index, it is worth remembering that when experts ask something like “How did the market work today?”, they mean the DJIA. It is noteworthy that its popularity is even higher than the demand for the Nasdaq Composite, which consists of 2,500 shares (some American, some international). In addition, by studying the statistics on the index, specialists can conduct excellent analytics, finding the “best” and “worst” years of the market through the decades.
Dow Jones companies
Discussing the DJIA, experts will definitely mention that the index is based on the shares of the thirty largest companies. For the summer of 2022, the list consists of the following brands:
- 3M Co
- American Express Co
- Amgen
- Apple Inc
- Boeing Co
- Caterpillar Inc
- Chevron Corp
- Cisco Systems
- Coca-Cola Co
- Dow Inc
- Goldman Sachs Group
- Home Depot Inc
- Honeywell International Inc
- Intel Corp
- International Business Machines Corp
- Johnson & Johnson
- JP Morgan Chase & Co
- McDonald’s Corp
- Merck & Co Inc
- Microsoft Corp
- Nike Inc
- Procter & Gamble Co
- Salesforce Inc
- Travelers Companies Inc
- UnitedHealth Group Inc
- Verizon Communications Inc
- Visa Inc
- Walgreens Boots Alliance Inc
- Walmart
- Walt Disney Co
FAQ
· What exactly is the Dow Jones?
The Dow Jones is an index. Its purpose is to aid investors in finding out the direction of stock prices. This happens by taking the prices of 30 of the stocks with the highest trading volumes on the Nasdaq and the New York Stock Exchange and grouping them.
Then, the average is rounded to the closest whole number. Every single company can equally influence the index, as the Dow Jones isn’t a weighted average.
The DIJA has been around since 1896 when it was first created by Charles Dow. Since then, it has been continuously published. Although it was created on May 26 of that year, it only began appearing regularly in the Wall Street Journal on October 7.
It is the second-oldest market index in the United States, with the Dow Jones Transportation Average being the first one. In the beginning, the index focused on 12 companies only, with all of them being mainly in the industrial sector, including tobacco, sugar, cotton, gas, and others.
The Dow Jones Industrial Average is one of the world’s most-watched stock market indexes.
The DJIA was also affected by many things over the years, such as warfare and politics. For instance, it dropped by 90% below its peak following the Great Depression and the 1929 great stock market crash. On top of that, trading was suspended for 4.5 months as fear of World War I arose, with the Dow Jones going down by 25% when trading returned.
· Why is it called Dow Jones?
The Dow Jones comes from the combination of the names of Charles Dow and Edward Jones. The two are the developers of the Dow Jones & Company which is behind the Dow Jones Industrial Average.
· What is the meaning of Dow in the stock market?
The Dow Jones Industrial Average is a method of measuring the general direction of the stock market. 30 of the largest publicly owned U.S. companies are included in the DJIA. As the Dow increases, it is considered bullish, which means most stocks have a great performance. Meanwhile, if the Dow drops, it is considered bearish, meaning that most stocks do not have a good performance and money is lost.
· Can you buy shares in the Dow Jones industrial average?
Buying shares in the Dow Jones Industrial Average is possible by using exchange-traded funds or ETFs. At the same time, it is crucial to know that investing in the Dow Jones Industrial Average directly is not possible, as it is nothing more but an index.
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