Dow Jones is actually a non-public company and is the largest business and financial news companies in the world. When investors refer to the ‘Dow Jones,’ however, they are referring to the Dow Jones Industrial Average which tracks publicly owned companies.
But what does that actually mean? How did the company Dow Jones become synonymous with investing and the stock exchange?
Keep reading to find out everything you need to know about the Dow Jones.
The Founding of Dow Jones
Dow Jones & Company was originally founded by Charles Dow, Edward T. Jones, and Charles Bergstresser in 1882. 7 years later those same individuals would also found the Wall Street Journal in 1889.
At the time Dow was well known for his ability to explain complicated financial news in a simple and well-understood way to the public. He believed firmly that investors should have a benchmark with which to indicate if the stock market was on the rise or not.
And so, the Dow Jones Industrial Average was created.
The Dow Jones Industrial Average
When investors refer to ‘the Dow’ or ask “What is the Dow Jones Today?” they are referring to the Dow Jones Industrial Average. The Dow tracks 30 large publicly owned companies that are traded on the New York Stock Exchange (NYSE) and the NASDAQ.
Initially, the index included only 12 companies that were industrial in nature. It is the second oldest index, the oldest being the Dow Jones Transportation Average which tracked publicly owned transportation companies.
The index will change over time as the economy changes. As companies rise and fall as representations of the economy, the Dow will adjust the list of companies it tracks.
How Is the Dow Calculated?
A major part of the Dow’s calculations when answering “what is the Dow Jones today?” is the Dow Divisor. The divisor is a predetermined constant value determines the effect of a 1 point move of any of the 30 companies tracked.
The Dow also weighs the price of shares of the stocks heavily. Because of this, the actual formula looks like this:
DJIA = SUM (Component stock prices) / Dow Divisor
This will ensure that a 1 point move by any component of the index will move the index by an identical number of points.
Dow Components
Though the index initially tracked only 12 companies, today the index tracks 30 companies. Here is the list of 30 companies tracked by the Dow:
- The 3M Company
- The American Express Company
- Apple Inc.
- The Boeing Company
- Caterpillar Inc.
- Chevron Corporation
- Cisco Systems, Inc.
- The Coca-Cola Company
- DowDuPont Inc.
- Exxon Mobil Corporation
- The Goldman Sachs Group, Inc.
- The Home Depot Inc.
- International Business Machines Corporation
- Intel Corporation
- Johnson & Johnson
- JPMorgan Chase & Co.
- McDonald’s Corporation
- Merck & Company, Inc.
- Microsoft Corporation
- Nike, Inc.
- Pfizer Inc.
- Proctor & Gamble Co.
- The Travelers Companies, Inc.
- UnitedHealth Group, Inc.
- United Technologies Corporation
- Verizon Communications Inc.
- Visa Inc.
- Walmart Inc.
- Walgreens Boots Alliance, Inc.
- The Walt Disney Company
Buying Dow Jones Stocks
When it comes to trading stocks that are listed on the Dow there is one important thing to remember. The Dow is an index, not an exchange platform. Dow Jones does not actually sell any stocks. They merely track the companies on their list.
With that being said the stocks listed on the Dow can be traded on the New York Stock Exchange (NYSE) and the NASDAQ. The Dow is meant more to give investors an idea of how the stock market is doing and whether it is on the rise or not.
This helps investors determine the feel of the market during a certain time frame, as well as being able to pinpoint those stocks that are most lucrative.
Dow Jones and Investing
When it comes to investing you would be a fool to ignore the Dow. It is the second oldest stock market index tracking 30 of the largest companies in the U.S.
The Dow refers to the Dow Jones Industrial Average which is the tool used by Dow Jones & Company to determine if the stock market is on the rise or not. The companies listed on the index are chosen based on how well they represent the current state of the economy.
As with any investing make sure to research the company itself before purchasing any stocks. This will help you to make smart investments and help you get one step closer to financial independence.
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