The Dow Jones Industrial Average (DJIA) was launched by Charles Dow way back in 1896, making it one of the oldest stock indexes. At the time, it was simply an average of the stock market's top 12 stocks.
Since then, the calculating the Dow has gotten a little more complicated, although it has lost its cachet as the premier benchmark of the stock market; that title now belongs to the S&P 500. However, it isn't time to forget the Dow altogether: the most blue chip stocks of the U.S. stock market belong to this index, making it a great choice for risk-averse investors who are looking for an index-tracking ETF. (For related reading, please see Index Investing: The Dow Jones Industrial Average.) Furthermore, the DJIA is probably the most quoted financial barometer in the world and has become synonymous with the financial markets in general. When people say the market has gone up or down by a certain number of points, they're usually referring to changes in the Dow.
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There are a number of ways to invest in the Dow Jones Industrial Average. SPDR Dow Jones Industrial Average ETF (NYSE:DIA) holds all 30 Dow stocks. The ETF, often called Dow Diamonds, closely mirrors the price performance of the DJIA. The Proshares Ultra Dow 30 (NYSE:DDM) doubles the price movement of the Dow in either direction through the use of leverage.
However picking individual stocks may have been more profitable. In 2010, out of the 30 stocks in the index, about 20 of the component stocks have yielded positive returns.
Here are the 6 highest performing DJIA stocks:
|Company||Market Cap||% Return|
|Caterpillar Inc. (NYSE:CAT)||58.16B||64.89%|
|DuPont & Co (NYSE:DD)||44.33B||50.39%|
|McDonald\'s Corp (NYSE:MCD)||81.47B||27.52%|
|The Home Depot, Inc. (NYSE:HD)||56.64B||23.16%|
|Boeing Co. (NYSE:BA)||46.80B||20.79%|
|Chevron Corp. (NYSE:CVX)||177.84B||19.06%|
The Bottom Line
The DJIA continues to serve its original purpose as a market and economic indicator, as set forth by Charles Dow back in 1929. As long as it contains the stocks of companies that reflect the major industrial areas of the U.S. economy during any given period, this 30-stock index will likely remain the gold standard of financial indicators.
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