The Dow Jones Index Explained

Dow Jones US index

Dow Jones index or Dow Jones and Company is one of the major business and financial index companies in the world. Founded by Charles Dow, Edward T. Jones and Charles Bergstresser in 1896, followed by the founding of the Wall Street Journal in 1889 which remain to be one of the most influential financial publications.

The Dow Jones or more commonly known as the Dow is one of the oldest most watched indices in the world and also is responsible for monitoring famous companies like General Electric, Microsoft, Coca-Cola and Exxon.

Inside The Dow

The Dow is a price-weighted index. This means that companies that have a higher share price are given a greater weight in the index. Since it first started, the Dow Jones Index was responsible for monitoring 12 companies that were purely industrial in nature and in the course of its existence there have additions and changes in the its company roster. In 1929, the Dow Jones Industrial Average (DJIA) debuted with 30 stocks changing its stocks from time to time. The only remaining original company to be under the Dow is General Electric.

The economy changes for various reasons and the index adapts to those changes in the company, so it is only fitting that the composition of the index also change. The Dow makes changes when a company experience financial troubles and fails to represent the economy, or when the economy shifts.

Besides the Dow Jones Industrial Average (DJIA) there are two other Dow averages namely: Dow Jones Utility Average (DJUA) and the Dow Jones Transportation Average (DJTA) which focuses mainly on railroad, trucking, shipping and airline industries.

The Dow Now

Although the Dow Jones only consists of a meager 30 stocks, some may say that the index couldn’t be of any value. This is a common misconception because the Dow Jones holds 30 of the most highly capitalized and influential companies in the U.S. economy.

Until now the Dow Jones index is still one of the most reliable and trusted index. It is the Media’s most referenced index in the U.S. Market because is remain a trusted indicator of market trends.
The DJIA still lives up to everyone’s expectation as reliable economic market indicator. As long as the Dow contains stocks from major companies during any given period, the Dow will remain to be a standard when it comes to financial indicators.

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