What Exactly is Dow Jones? A Discussion

What Exactly is Dow Jones

This feature has one primary aim: to define and discuss what Dow Jones is all about and what benefits traders are in for should they choose to invest with its offshoot, the Dow Jones Industrial Average (DJIA).

As an overview, this feature will go into the following discussions:

  1. Why Dow Jones & Company is considered one of the largest international news firms
  2. How Dow Jones was founded
  3. How the Dow Jones setup the Dow Jones Industrial Average (DJIA) and the many other indexes
  4. The 30 firms that are included in the DJIA

This feature would give its readers an idea on how Dow Jones works and why it has gathered such a huge following since its inception.

What Exactly is Dow Jones?

Dow Jones

The name Dow Jones does not just refer to one person. The firm was founded by three individuals back in 1882 with the name Dow Jones & Company. The names refer to Charles Dow, Edward Jones with the third, Charles Bergstresser, while not getting credit through the company’s name, is nevertheless an integral part in the company’s establishment.

In 1889, the same trio had founded the Wall Street Journal which is considered to be a financial publication to bear great clout in the business and financial sector.

Dow Jones had gained the respect of investors and businessmen, in light of its ability to unpack the most complicated of news features for the further understanding of its target audience.

Dow Jones is lauded by the industry in its pegging of benchmarks in order to determine if stocks would either rise or decline. A way by which the firm was able to do this is its choosing of a number of industrial-based Stocks for the first index. The average that had been reported from this effort was 40.94.

Charles Dow held on to the belief that there is a possibility of predicting Stock Market movements through the movements in price in certain Stocks. As stipulated in the Dow Theory, an upward trend in industrial Stocks is confirmed by the move in transportation Stocks. The theory sees the creation of market averages to efficiently forecast in what direction the industrial stocks or transportation stocks will be going.

Charles Dow and Edward Jones administered company operations during its early years. Upon Dow’s death in 1902, the company was bought by Clarence Barron and Jessie Waldron. Further in its history, the control to Dow Jones had been given to the Bancroft family. The next purchase of the company’s rights happened in 2007 wherein News Corp. bought Dow Jones & Company from the Bancroft family.

Despite its switching of ownerships, Dow Jones continued to be one of the most influential and poignant news outlets in the industry. The publications that are under Dow Jones’ belt is MarketWatch, Barron’s and, as already mentioned earlier, the Wall Street Journal.

However, it must be noted that Dow Jones & Company no longer holds control over the Dow Jones Industrial Averages. This is already owned by the joint venture by S&P Global and the CME Group, the S&P Dow Jones Indices LLC.

What is the Dow Jones Industrial Average (DJIA)?

Dow Jones Industrial

It is important to differentiate Dow Jones with the Dow Jones Industrial Average (DJIA).

The DJIA or more commonly known as the “the Dow” pertains to the most anticipated Stock Indexes internationally. The companies that are under this Index include Apple, Boeing, Coca-Cola, and Microsoft.

Preliminarily, the DJIA just launched 12 companies that belong to the industrial sectors. In its run, the firm went on to include 30 companies. The performance of these firms that delve into commodities such as cotton, gas, sugar, tobacco, and oil are considered benchmarks of the economy as these mirror the situation of the entirety of the economy. In general, the DJIA is seen by the industry as an effective determinant of the United States’ economic health.

Dow Jones & Company had setup the DJIA alongside many other indexes in its effort to represent the different sectors.
The 30 traded Stocks that the DJIA fosters are seen through the New York Stocks Exchange (NYSE) and the Nasdaq. This effectively aids investors in telling which direction Stocks are heading.

Interested investors may purchase Shares in the Dow through Exchange Traded Funds (ETFs). The Dow Jones Industrial Average is something that an investor cannot invest in given that it is, after all, just an index.

As already mentioned, the DJIA allows for the trade of the following Stocks from 30 of the biggest companies in the United States listed in the country’s Stock Exchanges:

 

 

CompanySymbolYear Added
3MMMM1976
American ExpressAXP1982
AmgenAMGN2020
Apple Inc.AAPL2015
BoeingBA1987
CaterpillarCAT1991
ChevronCVX2008
Cisco SystemsCSCO2009
The Coca-Cola CompanyKO1987
Dow Inc.DOW2019
Goldman SachsGS2013
The Home DepotHD1999
HoneywellHON2020
IBMIBM1979
IntelINTC1999
Johnson & JohnsonJNJ1997
JPMorgan ChaseJPM1991
McDonald’sMCD1985
Merck & Co.MRK1979
MicrosoftMSFT1999
NIKENIKE2013
Proctor & GamblePG1932
SalesforceCRM2020
The Travelers CompaniesTRV2009
UnitedHealth GroupUNH2012
VerizonVZ2004
VisaV2013
WalmartWMT1997
Walgreens Boots AllianceWBA2018
The Walt Disney CompanyDIS1991

It must be noted that the total of the Stock Prices of the companies within an Index to be divided by a certain factor is the value of the index. The aforementioned factor is tentative in that it changes as it undergoes a Stock Split. The value of the index, as one can notice, is in no way affected by the Stock Split.

To date, the components of the DJIA have undergone 55 times of modification since its inception back in May 26th 1896. This data had been recorded on August 31st 2020.

Article was published on: 01/18/21

Author: Viktor Nikolaev

Victor is a professional crypto investor and stockbroker, specializing in such areas as trading on the stock exchange, cryptov currencies, forex, stocks and bonds. In this blog he shares the secrets of trading, current currency indices, crypt currency rates and tells about the best forex brokers. If you have any questions, you can always contact [email protected]

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