The Dow Jones Industrial Average

Cheat Sheet:

  • It’s an example of a stock market index, a collection of stocks.
  • There are 30 companies in the DJIA.
  • You don’t have to buy all 30 stocks to track the Dow. You can buy an ETF (exchange traded fund).

You’ve probably heard of the Dow Jones Industrial Average, but what is it, exactly?  It’s a collection of 30 stocks that are supposed to represent how the overall stock market is doing. 

The list of 30 stocks in the Dow has changed over the years to keep up with the times. Two of the original companies were the Distilling & Cattle Feeding Company and the National Lead Company.  The latest addition is Apple, which replaced AT&T in 2015.

 

If you want to invest in the stocks that make up the Dow, you don’t have to buy all 30 stocks separately. You can do it in one fell swoop by investing in an index ETF that tracks the Dow. One well-known one is the SPDR Dow Jones Industrial Average ETF.  Investors refer to it as “Diamonds” because its ticker symbol is DIA.

One shortcoming of the Dow is that it’s hard for 30 stocks to do a great job of indicating how the overall stock market (tens of thousands of stocks) is doing.

previous lessonnext lesson

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s