Basics

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.

Dow Jones industrial average indes

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.

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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

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Components of the Dow Jones
SR NoCompanySymbolWeightPrice
1UnitedHealth Group IncorporatedUNH11.4324 504.00
2Goldman Sachs Group Inc.GS6.70954   300.50
3Home Depot Inc.HD6.39506   284.31
4Microsoft CorporationMSFT5.43488   233.89
5McDonald’s CorporationMCD5.16974   233.19
6Amgen Inc.AMGN5.08583   229.03
7Visa Inc. Class AV4.08712   183.27
8Caterpillar Inc.CAT3.93781   177.50
9Honeywell International Inc.HON3.85478   171.08
10Johnson & JohnsonJNJ3.56563   160.20
11Chevron CorporationCVX3.55484   160.10
12Travelers Companies Inc.TRV3.50573   156.88
13Salesforce Inc.CRM3.42359   150.18
14Apple Inc.AAPL3.2027   139.96
15American Express CompanyAXP3.13554   138.95
16Boeing CompanyBA2.91135   129.74
17Walmart Inc.WMT2.8999   128.55
18Procter & Gamble CompanyPG2.78538   124.25
19International Business Machines CorporationIBM2.69179   118.77
203M CompanyMMM2.44712   107.64
21JPMorgan Chase & Co.JPM2.38149   105.87
22Walt Disney CompanyDIS2.20311   96.82
23NIKE Inc. Class BNKE1.98575   87.16
24Merck & Co. Inc.MRK1.92563   87.59
25Coca-Cola CompanyKO1.21189   54.45
26Dow Inc.DOW1.00246   44.41
27Cisco Systems Inc.CSCO0.91437   40.36
28Verizon Communications Inc.VZ0.83332   36.85
29Walgreens Boots Alliance Inc.WBA0.71022   30.65
30Intel CorporationINTC0.59857   25.73

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

YearClosing ValueNet Change% Change
201213,1048877.26
201316,5773,47326.5
201417,8231,2467.52
201517,425−398−2.23
201619,7632,33813.42
201724,7194,95725.08
201823,327−1,391−5.63
201928,5385,21122.34
202030,6062,0687.25
202136,3385,73218.73
30.09.2228,725-7,613-20.95

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.

Dow Jones industrial average index

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.

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