What is the Dow Jones Industrial Average?

Most of people are don’t know that what is the Dow jones and how its work, but in this article you will learn all things about dow jones.

After reading this article you will know what is dow jones, how dow jone works and which are the listed companies in dow jones index.

Table of Contents

What is the Dow Jones Stock Index?

The Dow Jones Industrial Average is Created in 1896, it is a stock index that tracks 30 of the largest U.S. companies. It is one of the oldest stock indexes, and its performance is widely considered to be a useful indicator of the health of the entire U.S. stock market.

The Dow Jones Industrial Average index is managed by S&P Dow Jones Indices, a joint venture majority-controlled by the financial information and analytics company S&P Global.

The Dow Jones Industrial Average does not include just industrial stocks, but also stocks from most sectors and industries, except for utilities and transportation, which are measured by other indexes which are specific to those fields.

History of the Dow Jones Industrial Average

Charles Dow and journalists Edward Jones and Charles Bergstresser created Dow Jones & Company, the parent company of The Wall Street Journal, in 1882, invented the Dow Jones Industrial Average on May 26, 1896.

The Dow Jones Industrial Average began as an index made up of 12 businesses. Most of them were industrial businesses like General Electric (NYSE:GE).

The number of stocks in the index increased over time as its emphasis switched from assessing the performance of the heavy industrial sector to assessing the health of the whole U.S. stock market.

Since 1928, the index has tracked 30 different companies.

Companies in the Dow Jones Index

3M (NYSE:MMM)
American Express (NYSE:AXP)
Amgen (NASDAQ:AMGN)
Apple (NASDAQ:AAPL)
Boeing (NYSE:BA)
Caterpillar (NYSE:CAT)
Chevron (NYSE:CVX)
Cisco Systems (NASDAQ:CSCO)
Coca-Cola (NYSE:KO)
Disney (NYSE:DIS)
Dow (NYSE:DOW)
Goldman Sachs (NYSE:GS)
Home Depot (NYSE:HD)
Honeywell International (NYSE:HON)
IBM (NYSE:IBM)
Intel (NASDAQ:INTC)
Johnson & Johnson (NYSE:JNJ)
JPMorgan Chase (NYSE:JPM)
McDonald’s (NYSE:MCD)
Merck (NYSE:MRK)
Microsoft (NASDAQ:MSFT)
Nike (NYSE:NKE)
Procter & Gamble (NYSE:PG)
Salesforce (NYSE:CRM)
Travelers (NYSE:TRV)
UnitedHealth Group (NYSE:UNH)
Verizon (NYSE:VZ)
Visa (NYSE:V)
Walmart (NYSE:WMT)
Walgreens Boots Alliance (NASDAQ:WBA)

How is the Dow Jones Industrial Average's value calculated?

The Dow Jones Industrial Average is price-weighted whereas the majority of stock market indices are based on market capitalization, which is calculated by multiplying the share price by the number of outstanding shares.

The average stock price of the 30 listed firms is used to compute the Dow Jones Industrial Average’s value.

It is not as easy as adding up the 30 stock values and dividing by 30 to determine the average value.

In keeping with Charles Dow’s original intent, any change in the share price of any firm featured on the Dow has an equal impact on the index’s value.

But it’s crucial to understand that, on a percentage basis, the value of the index is more affected by the fluctuations of the most expensive stocks.

Conclusion

The stock performance of 30 renowned American corporations is tracked by the Dow. As one of the first stock market indices, the price-weighted index was created in 1896.

It doesn’t have the same level of diversification as more inclusive indexes like the S&P 500, but it nevertheless shows the state of the stock market and major corporations.