The Dow Jones Industrial Average (DJIA) is a stock market index that measures the performance of 30 large, publicly owned companies based in the United States.The DJIA was created by Charles Dow, along with Edward Jones and Charles Bergstresser. It is one of the oldest, continually used indices in financial history. Dow founded Wall Street Journal editorials and was co-creator of the Dow Jones Average. The average is price-weighted, meaning stocks with higher prices have greater influence on movements in the index than those with lower prices. The original component companies were General Ele
Introducing the Dow Jones
In January 1896, Dow Jones published The Wall Street Journal, which is now a renowned newspaper and a part of Dow Jones & Co., Inc., the investment arm of The Wall Street Journal. The paper contains a report of the previous trading week and its closing price. Dow Jones created the Journal in order to report financial news in a high-quality and detailed manner. The Dow Jones Average was introduced in March 1896. At that time, the Dow Jones was calculated using the closing prices of 45 companies, with Jones’ discretion in choosing the companies to be added. In 1927, The Wall Street Journal began publishing a daily version of the index with Dow Jones & Co. as the sponsor. In 1928, the 30 components were selected through a vote of Jones’ newspaper staff.
The Early Years
The average was initially based on 50 securities. Today, it consists of 30 components, including only the two of the original constituent companies General Electric and GEICO. General Electric is now a more diversified company while Berkshire Hathaway has acquired GEICO. The first edition of the index was published on November 26, 1896. The first-ever company included in the DJIA was R.T. Whitney & Co., a retailer of “old time” penny stocks. The original methodology was that of a price-weighted index, with the first two price-weighted indices calculated by equal weights. The holdings of the index were based on total market capitalization. The original rules, although still in effect, can be found in the DJIA Rules of Engagement and the DJIA Index Rules of Engagement.
What is a DJIA?
First published in 1896, the DJIA was one of the first stock market indices designed for portfolio-building. The idea was simple: use the underlying share price of a stock to calculate its performance, then compare it to other stocks in the index to determine its ranking. The result was the first index that was comprehensive and objective. Possible Strategy To provide an investment strategy for those who want to follow the DJIA for the long term, we employ a simple, proven strategy. By weighting the 30 DJIA stocks by price, we will receive a comparable performance over the long run, in terms of total returns.
What does it measure?
The Dow is made up of 30 large companies, and the components of the index have an equal weighting in the index. When one stock moves up or down in value of more than 3%, that share is added to the average, where it effects changes in the index’s price. The blue-chip index is one of the most widely followed stock market indicators and is considered a leading indicator of changes in the equity markets. Because it is so widely watched, this index is generally considered a relatively safe investment option. Why It’s A Great Time to Invest More than any other time, it is now a great time to invest. The Dow Jones Industrial Average recently set a new record high, up 1,000 points over the past few weeks.
How can I invest in the Dow Jones?
The SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) tracks the Dow Jones today, and since its inception in 1992, has returned about 10% annually. The NYSE Composite Index, which is market capitalization weighted, was started by Charles Dow as a long-term measure of the performance of all stocks trading on the New York Stock Exchange. Unlike the DJIA, the NYSE Composite Index follows a modified equal-weighted method and has historically returned a little more than 20% annually. The Financial Times began tracking the Global Composite Index in 1980. The iShares Core S&P Small-Cap ETF (NYSEARCA: IJR ) is based on the S&P Small-Cap 600 Index, which has returned roughly 21% annually.
Dow Jones is the first company I had ever heard of, and from its highs in July of 2001, the price was over $360,000. A few weeks later, it reached an all-time high of over $200,000. It is probably an extreme example, but maybe you know someone who was a bit taken by the attention the Dow got, not knowing it was just a number. One of the best things about indexing is that one investment doesn’t “need” to be the next Microsoft or Google. The average index component can be a simple stock from a sector like consumer discretionary, financials or technology, so people can build diversified portfolios. The stock market is one of the best investing tools for very long-term wealth building, but it must be protected just like any other investment.