Explaining the Dow Jones Index for beginners – what is DJIA
As stock market for beginners guide I have explained NASDAQ at length in one of my earlier posts and also I have made sure that you have adequate understanding of Dow Jones index.
However It seems that post was not enough for people to understand the Dow Jones index as beginners. That is why this post will help you understand Dow Jones in pure simple terms.
Let us begin at the very simple definition of a stock market index.
A stock market index is what is needed to help you track the market. In general it is a way to tell the broader market direction. The broader market will I turn tell the health of the economy.
Then somebody thought of this and took a group of securities and decide that their simple average of the prices will be like and index.
Then you compare yesterday’s index with today’s and say that the broader market was up or below the previous day index. Now if it was simple average then a company with huge price will be able to manipulate the index and hence they have weighted average so as to discount the theory that one company can potentially influence the stock market movement.
The Dow Jones industrial 30 companies are carefully selected and the index is calculated very carefully and here is the current list of the Dow Jones stock list and I have the Dow Jones industrial 30 companies symbols.
3m Co (MMM)
Alcoa Inc (AA)
American Express Company (AXP)
AT&T Inc (T)
Bank of America Corporation (BAC)
Boeing Co (BA)
Caterpillar Inc (CAT)
Chevron Corp (CVX)
Cisco Systems Inc (CSCO)
E.I. du Pont de Nemours and Company (DD)
Exxon Mobil Corp (XOM)
General Electric Company (GE)
Hewlett-Packard Co. (HPQ)
Intel Corporation (INTC)
International Business Machines (IBM)
Johnson & Johnson (JNJ)
JP Morgan & Chase & Co (AMJ)
Kraft Foods Inc (KFT)
McDonald’s Corporation (MCD)
Merck & Co., Inc. (MRK)
Microsoft Corporation (MSFT)
Pfizer Inc (PFE)
The Coca-Cola Company (KO)
The Home Depot, Inc.(HD)
The Procter & Gamble Company (PG)
Travelers Companies Inc (TRV)
United Technologies Corporation (UTX)
Verizon Communications (VZ)
Wal-Mart Stores, Inc. (WMT)
Walt Disney Company (The) (Holding Company) (DIS)
So how does the Dow Jones work and how the Dow Jones is computed and measured.
The average price of the 30 stocks is taken and then divided by a divisor. It is this divisor which is calculated and adjusted based on the splits, mergers and the overall weight of each stock. If this divisor was 1 then assuming Dow Jones is a stock then the stock price is simply the average stock price of each stock. This weight for each is calculated by the price weightage method.
The Dow Jones closing history and the Dow Jones closing stock charts will tell us that the market has invariably gone through a lot of ups and downs and each time it has rebound and has given the amazing returns tom investors and in turn also giving out some good market gurus like Warren Buffet.
Then there are other set of industrial averages related to each industry which are tracked by a lot of people and these are collectively known as Dow Jones Industrials. This is important for understanding the stock market
Related posts:
- Stock Market investing for beginners – What is a Stock Market Index?
- Understanding Dow Jones Industrial Average
- Dow Jones Blue chip stocks
- Buy index stock
- EMini Trading – E-mini S&P 500, E-mini NASDAQ and Emini Dow Jones
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Tagged With DJIA, Dow Jones, Dow Jones for beginners, dow jones for dummies, dow jones for idiots, list of dowm jones stocks, understanding the dow jones index
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