Understanding The Dow Jones Industrial Average

Have you heard of the Dow Jones industrial average? If you have even the slightest interest in the stock market, then the answer is probably yes. In fact, the Dow is the country’s most recognized stock indexdjx:.dji guide. However, you may not have a thorough understanding of what it is. In this resource, you will understand what the Dow Jones Industrial Average is and whether you should take it into consideration for your next investing strategy.

Usually referred to as the Dow Jones, DJIA is the weighted price average of 30 American publicly traded companies. We all have Charles don’t to thank for the DJIA. He created the Dow back in 1896. More than a century later, it is now being used to measure the performance of the US stock index on a day-to-day basis.

You might wonder what the price-weighted index means. This only means that stocks with a higher price have a bigger influence on the overall performance of the index compared to stocks with a lower price.

In the Dow Jones industrial average, the prices of the 30 stocks are added and then divided by the Dow divisor. Several factors influence of this divisor, including stock splits and other huge financial events.

It’s also worth noting that the 30 stocks included in the dough change frequently. And while it is the most popular stock index in the US, it doesn’t guarantee your success in investing.

The most obvious disadvantage is the fact that it only includes 30 stocks. Considering that over 5000 shares are trading on NASDAQ and the NYSE, the performance of the Dow may not be the best indicator of the fulfilment of the overall market. Still, it continues to be an attractive option especially for those who are just getting started in investing.