Dow Jones Industrial average (DJIA) or mainly called as Dow is an index of stock market in US. Dow Jones index is consisted of 30 stocks.
DJIA is the oldest and most followed index of the world. As it consists of only 30 shares, many analysists consider it inadequate and not a representative of the economy. Many new age stocks have not been included in the Dow Jones Industrial average Index Like Meta, alphabet, Tesla, Netflix, Zoom etc.
The Dow Jones Industrial Average (DJIA), also known as the Dow Jones or simply the Dow, is a stock market index that measures the stock performance of 30 large publicly traded companies listed on the New York Stock Exchange (NYSE) and the NASDAQ. The Dow is one of the oldest and most widely followed stock market indices in the world, and it is considered to be a barometer of the overall U.S. stock market.
The DJIA was created by Charles Dow, co-founder of Dow Jones & Company, in 1896, and it originally consisted of just 12 companies. Today, the Dow is made up of 30 of the largest and most influential companies in the U.S., including household names such as Apple, Microsoft, and ExxonMobil. The index is calculated based on the prices of the stocks of these companies, and it is updated in real-time throughout the trading day.
One way to analyze the performance of the Dow is by looking at its “zones,” which are ranges of the index’s value. For example, a Dow in the “green zone” would be trading above its 50-day moving average and could be seen as a positive sign for the stock market. On the other hand, a Dow in the “red zone” would be trading below its 50-day moving average and could be seen as a negative sign.
While the Dow is a widely followed stock market index, it is important to note that it is just one of many indicators of the overall market’s health. Investors and analysts also look at other stock market indices, such as the S&P 500 and the NASDAQ, as well as economic indicators, such as GDP and employment data, to get a more comprehensive view of the market.
Basis of Calculation of DJIA
Further, its main drawback is that it is being calculated on the basis of Price of the stock and not on the basis of Market capitalization or Floating stock Basis.
Who discovered the Dow Jones Index
It was firstly calculated by Charles Dow in 1896, the editor of wall streel journal at that Time which was also a found of Dow Jones company. So, index was named on Charles Dow.
30 Stocks in Dow Jones and weightage thereof
At present following companies are constituent of the DJIA (Stocks in DJIA) as on 07/10/2022. As the Dow Jones is Price based index, hence its weights are also changed day to day. If a stock split is done by the company, then its weight in the index will reduce accordingly
|Components of the Dow Jones|
|1||UnitedHealth Group Incorporated||UNH||11.4324||504.00|
|2||Goldman Sachs Group Inc.||GS||6.70954||300.50|
|3||Home Depot Inc.||HD||6.39506||284.31|
|7||Visa Inc. Class A||V||4.08712||183.27|
|9||Honeywell International Inc.||HON||3.85478||171.08|
|10||Johnson & Johnson||JNJ||3.56563||160.20|
|12||Travelers Companies Inc.||TRV||3.50573||156.88|
|15||American Express Company||AXP||3.13554||138.95|
|18||Procter & Gamble Company||PG||2.78538||124.25|
|19||International Business Machines Corporation||IBM||2.69179||118.77|
|21||JPMorgan Chase & Co.||JPM||2.38149||105.87|
|22||Walt Disney Company||DIS||2.20311||96.82|
|23||NIKE Inc. Class B||NKE||1.98575||87.16|
|24||Merck & Co. Inc.||MRK||1.92563||87.59|
|27||Cisco Systems Inc.||CSCO||0.91437||40.36|
|28||Verizon Communications Inc.||VZ||0.83332||36.85|
|29||Walgreens Boots Alliance Inc.||WBA||0.71022||30.65|
Year wise return of Last 10 Years
Dow Jones industrial average index has given a Handsome return on Investment in Last 10 years. Year wise return is shown below in the table. In year 2015 and 2018 it has given minus return but in all other year dow jones has given 7.25 to 26.5 % return. In current year 2022 its returns are also negative 20.95% up to 30.09.2022
|Year||Closing Value||Net Change||% Change|
Accepted even after shortcomings
Now, new Index S&P Dow jones 500 and S&P Indexes are popular. For, New Age stock Nasdaq is being followed religiously. But even after so many shortcomings Dow Jones Industrial index is most followed index and derivatives based on DJIA (futures) are also one of the most traded futures of the world of any indices.
Many Exchange traded funds based on Dow jones are framed by many mutual fund houses. Investors are also invested in such ETFs . Dow Jones index is treated as the economy indicator of US economy.
Know all about Nasdaq 100 Index