Index Investing: The Dow Jones Industrial Average
AAA
  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

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
Index Investing: The Dow Jones Industrial Average
RELATED TERMS
  1. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
  2. Ulcer Index - UI

    An indicator developed by Peter G. Martin and Byron B. McCann ...
  3. Investment Company Act Of 1940

    Created in 1940 through an act of Congress, this piece of legislation ...
  4. Product Portfolio

    Investopedia explains: A Product Portfolio is the collection ...
  5. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  6. Target-Date Fund

    A mutual fund in the hybrid category that automatically resets ...
  1. What are the best ways to lower my investing fees?

    Lower your investing fees by buying index funds or ETFs, choosing the right mutual fund share class, evaluating breakpoints ...
  2. What is the difference between a 401(k) plan and a 403(b) plan?

    Administered by for-profit, private companies, 401(k) plans are more common than the nonprofit or government-sponsored 4 ...
  3. When can you trade the stocks in the Dow Jones Industrial Average (DJIA)?

    Find out when you can trade shares linked to the Dow Jones Industrial Average during NYSE and Nasdaq trading sessions.
  4. Can you buy shares in the Dow Jones Industrial Average (DJIA)?

    Invest in the Dow Jones Industrial Average index through index funds or ETFs.
comments powered by Disqus
Related Tutorials
  1. Top ETFs And What They Track: A Tutorial
    Mutual Funds & ETFs

    Top ETFs And What They Track: A Tutorial

  2. Analyzing The Best Retirement Plans And Investment Options
    Retirement

    Analyzing The Best Retirement Plans And Investment Options

  3. Guide To ETF Providers
    Mutual Funds & ETFs

    Guide To ETF Providers

  4. Complete Guide To Investment Companies, Funds And REITs
    Mutual Funds & ETFs

    Complete Guide To Investment Companies, Funds And REITs

  5. How To Analyze ETFs With Bloomberg
    Trading Systems & Software

    How To Analyze ETFs With Bloomberg

Trading Center