Dow Jones Industrial Average (DJIA)

What Is the Dow Jones Industrial Average (DJIA)?

At the point when investors need to know how the stock market is doing, they go to stock indexes like the Dow Jones Industrial Average (DJIA). Ordinarily known as "the Dow," it is an assortment of 30 blue-chip American companies that, when taken together, give a snapshot of the overall stock market: When the Dow closes the trading day higher, investors interpret that as meaning the overall market is up. At the point when the Dow closes the day lower, the market is down.
The Dow is a price-weighted index, and that means that every part company is weighted by its share price. Higher-priced companies have a larger weight than lower-priced companies, thus their movement biggerly affects the index's overall value. [Stock splits](/switch forward-split), which happen when companies issue more shares to shareholders without weakening their value, generally affect price-weighted indexes since the recently split stock has a lower price and in this way is worth essentially less to the index.
The Dow contrasts from different indexes like the S&P 500 and the Russell 2000 in that it is price-weighted, while different indexes are capitalization-weighted, and that means every part is valued by its market cap, or the total value of all outstanding shares.

Why Is the DJIA Important?

The Dow is comprised of 30 of the largest publicly traded companies in America, and it is one of the most notable market indicators. Stock indexes like the Dow are important intermediaries for the New York Stock Exchange, and you'll frequently hear it quoted on the evening news. Stock indexes give a quick image of the total performance of the stock market consistently — the DJIA is known as a benchmark index for U.S. blue-chip stocks, in particular.

Might I at any point Buy the DJIA? What Is Its Ticker Symbol?

New investors might find the concept of the Dow a bit confounding: It is abbreviated as DJIA, yet that is not its ticker symbol. Its ticker symbol is DJI, yet it's anything but a stock, and you can't buy or trade shares. While the Dow itself isn't tradable, you can invest in the companies that make up the Dow; what's more, specific ETFs and mutual funds are intended to mirror the Dow's composites. The explanation the Dow's ticker symbol is unmistakably shown on Wall Street's trading screens and financial data suppliers is so investors can see the market's performance initially.

How Is the Dow Jones Industrial Average Calculated?

To work out the Dow, you would just include the prices of its 30 stocks and gap the sum by the Dow Divisor, a numeral that factors in stock splits and stock dividends. The Dow Divisor is a universal method for understanding the effect of a one-point move in any of the 30 stocks that make up the Dow.
The Dow Divisor changes much of the time and is kept up with by Dow Jones Indices. On January 10, 2022, the Dow Divisor was 0.152.

How Are Stocks Selected for the Dow? Who Selects Them?

Curiously, the Dow is chosen by a committee of editors of The Wall Street Journal. They have the tremendous responsibility of concluding which companies get added to (or dropped from) the Dow Jones Industrial Average. There are no rules for consideration — just the common principles that a company's market capitalization must be large, it must have a magnificent reputation, and it must exhibit supported growth.
As a matter of fact, the main true requirements are that each company must be a non-transportation or non-service company in the S&P 500.
"While choosing stocks for the Dow, we Journal editors basically try to mirror the market in just 30 stocks (minus transportations and utilities)," proofreader Mike Prestbo said in an article itemizing a portion of the mysteries of the Dow.

Which Companies and Sectors Are Currently in the Dow?

Here are the 30 companies that make up the Dow Jones Industrial Average along with their ticker symbols, the exchange they trade on, and the date they were added.

Dow Jones Industrial Average

The companies in the Dow address a scope of enterprises — everything from technology to industrial materials, financials, energy, consumer discretionary, and medical care, to give some examples. The 10 companies in the Dow with the largest dividend yields are regularly alluded to as the "canines of the Dow."
And, surprisingly, however the Dow has a smaller concentration than, say, the S&P 500, its long-term performance is quite like more extensive indexes like the S&P 500.

Which Companies Have Been Dropped from the Dow?

Financial performance is a big factor in whether a company stays in the Dow, and it embraces market trends, for example, leaning toward technology and healthcare companies over, say, energy companies, in spite of the fact that Chevron (CVX) is currently a part of the Dow.
Probably the biggest names as of late dropped from the Dow incorporate Bank of America (BAC), Alcoa (AA), HP (HPQ), Sears (SHLDQ), and General Electric (GE).

What Other Stock Indexes Are Out There?

Stock indexes can address the whole market or a particular industry or segment. They are utilized by investors, fund managers, and analysts to figure out a particular industry or the more extensive market — as well as measure its performance. They can be price-weighted or capitalization-weighted.
Notwithstanding the Dow, five famous US indexes include:

• S&P 500
• NASDAQ Composite
• Wilshire 5,000
• Russell 3000
• NYSE Composite

What Are Some Criticisms About the Dow?

Since there are just 30 companies in the Dow, pundits think it is a deficient representation of the stock market in general. The way that it disregards market cap is another explanation numerous analysts favor the S&P 500 over the Dow as a stock market benchmark. TheStreet's Eric Jhonsa trusts the August 2020 expansion of Salesforce (CRM) to the Dow shows how arbitrary the index's mechanics can be.

What Is the History of the Dow Jones Industrial Average?

The Dow is one of the most seasoned stock market indexes, made in 1896 by Charles Dow, pioneer behind The Wall Street Journal. The Dow was named partly in his honor; Jones comes from the paper's prime supporter, Edward Jones, who was likewise an analyst. The original Dow index just held back 12 stocks and really was average weighted — to figure out its average, all you would have to do was include the share prices of the 12 companies and gap by 12.
Today, the index is kept up with by S&P Dow Jones Indices.

Features

• The DJIA is a price-weighted index that tracks 30 large, publicly-possessed companies trading on the New York Stock Exchange (NYSE) and the Nasdaq.
• The Dow Jones Industrial Average (DJIA) is a generally watched benchmark index in the U.S. for blue-chip stocks.
• The index was made by Charles Dow in 1896 to act as a proxy for the more extensive U.S. economy.

FAQ

When Did the DJIA Top 10,000 interestingly?

The Dow Jones Industrial Average (DJIA) hit 10,000 without precedent for March 1999. The DJIA then, at that point, hit 11,750 in January of 2000, before falling to below 7,200 in October 2002 after the website crash.

What Does the Dow Jones Measure?

The Dow Jones Industrial Average (DJIA) tracks the price movements for 30 large companies in the United States. Such companies incorporate Microsoft (MSFT) and Home Depot (HD). The chose companies are from all major U.S. sectors, with the exception of utilities and transportation.

The DJIA Is Based on the Prices of How Many Stocks?

The Dow Jones Industrial Average (DJIA) is comprised of 30 large stocks. Every one of the stocks are situated in the United States. The DJIA is otherwise called the Dow 30.