The Dow Jones Industrial Average is a stock index that tracks the stock prices of 30 major companies. It was created by Charles Dow in 1896 and updated daily. The index has been used as a benchmark for many investing strategies, such as buy-and-hold, market-capitalization weighting, and fundamental analysis. The stocks today were mostly up at the opening, with Amazon and Microsoft leading the way.
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Why should you care about the Dow Jones Industrial Average?
The stock market has risen throughout 2018, and the Dow Jones Industrial Average reflects those gains. When you add together the closing prices of all the stocks that make up the average, you’ll get an aggregate figure called the Dow Jones Industrial Average (DJIA today) Price per Share (PPS). You can use that number to see how much of your savings are going to Dow Jones stocks. The companies in the Dow Jones Industrial Average include some of the biggest names in business. Here are just some of the companies that belong to the Dow Jones today: Apple International Business Machines (IBM) The Walt Disney Company, Amazon Microsoft Intel Facebook The biggest worry about the Dow Jones Industrial Average is the possibility that the index will soon follow the stock market’s correction.
What is the Dow Jones Industrial Average?
Dow Jones is a stock index that tracks the stock prices of 30 major companies and the smallest constituent of the index is Johnson & Johnson (NYSE: JNJ ) at just 3.4%. The original Dow Jones Index came about as a way to track the stock prices of larger companies. It was the brainchild of Charles Dow and took its name from the Dow Jones New York Stock Exchange. Charles Dow also was a founder of Standard Oil. Since its founding, most of the Dow Jones Industrial Average has been through four significant changes or major updates. The most recent was in 2013, when the index’s 30 components were reduced to just 20 in an effort to increase liquidity in the index. The index is calculated using the closing prices of all 30 stocks in the index on the day before the index was created.
How does it work?
The Dow is formed by adding the stock prices of 30 of the most commonly traded stocks. The first four are the original Dow companies, all financial firms: New York Stock Exchange Columbia, which was a bank; Pennsylvania Railroad National City Bank The first 20 stocks are the so-called original Dow Jones Industrial Average. The index is rebalanced on the first and the third trading days of every month. This is an annual process that’s based on a stock’s relative strength (DOTR). The DOTR is the percentage change in stock price over the last four trading days of the month. For example, if a stock has a DOTR of up to 1%, it is considered overbought, while a stock with a DOTR below 0.1% is considered undervalued.
What are the stocks that make up the Dow Jones Industrial Average?
When the Dow Jones Industrial Average is updated, it is a benchmark for investments that are designed to keep track of the health of the U.S. stock market. As an index, the Dow Jones Industrial Average consists of 30 stocks. The first five components of the Dow are typically Boeing, ExxonMobil, JPMorgan Chase, Apple, and General Electric. The next 10 components are comprised of the next five biggest companies in terms of market capitalization: Caterpillar General Electric Johnson & Johnson Coca-Cola Chevron Phillips 66 Procter & Gamble UnitedHealth UnitedHealth Group The last five stocks are commonly added to the Dow each time there is a tie among the top 10 stocks.
Conclusion
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