Index Investing: The Dow Jones Industrial Average
  1. Index Investing: Introduction
  2. Index Investing: What Is An Index?
  3. Index Investing: The Dow Jones Industrial Average
  4. Index Investing: The Standard & Poor's 500 Index
  5. Index Investing: The Nasdaq Composite Index
  6. Index Investing: The Wilshire 5000 Total Market Index
  7. Index Investing: The Russell 2000 Index
  8. Index Investing: Other Indexes
  9. Index Investing: Index Funds
  10. Index Investing: Conclusion

Index Investing: The Dow Jones Industrial Average


The Dow Jones Industrial Average (DJIA) contains 30 of the largest and most influential companies in the U.S. It is the most recognized index in the world, and the one that is frequently referred to as "the market". Despite its popularity, however, the DJIA has some weaknesses as a benchmark for the overall market.

Created By: Charles Dow on May 26, 1896. Currently maintained by Dow Jones & Company.
Number of Companies: It began with 12. Today there are 30.
Types of Companies: Various. The DJIA covers all major areas of the U.S. economy except the transportation and utility sectors.
Selection Criteria: Selection is at the discretion of The Wall Street Journal editors. Reviewed as needed.
How it\'s Calculated: The original DJIA was simply an average of stock prices. Today it uses a price-weighted system. For example, McDonalds\' stock is worth approximately 5% of the DJIA.

Advantages: The DJIA has stood the test of time. It contains 30 of the most familiar blue chip companies in the U.S. and is not considered to be volatile or risky.
Disadvantages: There are well over 10,000 public companies in the U.S. Containing only 30 companies, the DJIA doesn\'t even come close to being a benchmark for the entire market. For this reason, the S&P 500 is beginning to take over as the benchmark of choice. Also, a weighting based on market cap is generally thought to be more effective than price weighting.
Investing: The DJIA has several index funds that track it as well as an Exchange-Traded Fund (ETF) called the Dow Diamonds that trades under the symbol DIA on the American Stock Exchange (AMEX).

Index Investing: The Standard & Poor's 500 Index

  1. Index Investing: Introduction
  2. Index Investing: What Is An Index?
  3. Index Investing: The Dow Jones Industrial Average
  4. Index Investing: The Standard & Poor's 500 Index
  5. Index Investing: The Nasdaq Composite Index
  6. Index Investing: The Wilshire 5000 Total Market Index
  7. Index Investing: The Russell 2000 Index
  8. Index Investing: Other Indexes
  9. Index Investing: Index Funds
  10. Index Investing: Conclusion
RELATED TERMS
  1. Dow Jones Industrial Average (DJIA) Yield

    The aggregate dividend yield on the 30 stocks that make up the ...
  2. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average ...
  3. Standard & Poor's 500 Index - S&P 500

    An index of 500 stocks chosen for market size, liquidity and ...
  4. Dow Jones Transportation Average - DJTA

    A price-weighted average of 20 transportation stocks traded in ...
  5. Market Swoon

    A slang term for a decline in the overall value of the stock ...
  6. Diamonds

    1. An extremely hard gemstone used mainly for jewelry, tools ...
RELATED FAQS
  1. What does the Dow Jones Industrial Average measure?

    Learn about what the Dow Jones Industrial Average measures and discover the meaning of changes in this important and widely ... Read Answer >>
  2. Where can I find all of the stocks in the Dow Jones Industrial Average?

    The best place to find a list of all thirty stocks included in the Dow Jones Industrial Average (DJIA) is the "Historical ... Read Answer >>
  3. What's the difference between the Dow Jones Industrial Average and the S&P 500?

    The major difference between these two indexes is that the Dow Jones Industrial Average (DJIA) includes a price-weighted ... Read Answer >>
  4. What is the difference between the Dow Jones Industrial Average and the S&P 500

    Learn about the Dow Jones Industrial Average and the S&P 500, including interesting facts about these indexes, and discover ... Read Answer >>
  5. Who or what is Dow Jones?

    Dow Jones, or more precisely "Dow Jones & Company", is one of the largest business and financial news companies in the ... Read Answer >>
  6. Can you buy shares in the Dow Jones Industrial Average (DJIA)?

    Invest in the Dow Jones Industrial Average index through index funds or ETFs. Read Answer >>
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