Published on 22.03.2024

Dow Jones index

The Dow Jones index includes thirty of the largest Wall Street companies.

Below are some of the stocks listed on the Dow Jones.

Symbol Name
AAPL Apple
BA Boeing
KO Coca Cola
IBMA

IBM

INTC Intel
JNJ Johnson & Johnson
MCD

McDonald’s

MSFT Microsoft
NKE Nike
CRM

Salesforce

DIS Walt Disney

What is the Dow Jones?

The Dow Jones Industrial Average is one of the most well-known stock indices in the world. This index fund is made up of thirty of the largest companies listed on Wall Street. The index is also known as the Dow Jones, the Dow or the DIJA, and it’s considered as an important indicator of the overall sentiment towards the American stock market and global exchanges.

Composition of the Dow Jones

At its inception, the Dow Jones consisted of twelve stocks. It wasn't until 1928 that the index reached its current number of thirty stocks. The composition of the Dow Jones changes regularly. Often, including large companies such as Coca-Cola, Walt Disney and Goldman Sachs.

A committee determines the composition of the Dow Jones Industrial Average. This ‘Index Committee’ consists of three representatives from S&P Dow Jones Indices and two representatives from The Wall Street Journal. Changes can be made at any point in time. The committee meetings are strictly confidential because alterations to the Dow Jones composition can be sensitive information that investors may base their decisions on.

The Dow Jones index contains companies with a good reputation

There are no fixed rules determining which stocks are included in the Dow Jones. However, an important requirement for companies to be included in the index is that they must be based in the United States (US). Companies need to have their headquarters in the US and generate the highest revenue there compared to other regions.

Furthermore, a stock is only added to the Dow Jones if the company has an good reputation, shows long-term growth and attracts many investors. Additionally, having a good sector diversification is an important requirement during the selection process.

How is the Dow Jones calculated?

The Dow Jones Industrial Average is a price-weighted index. This means that the stock price determines the weight of each stock in the index calculation. To determine the index value, the prices of the thirty stocks are added and divided by the so-called divisor. Therefore the Dow Jones value is a kind of average. S&P Dow Jones Indices adjusts the divisor when actions are undertaken that can affect the stock price. These actions include stock splits, stock issuances or dividend payments.

Dow Jones Price Return and Total Return

The Dow Jones Industrial Average has both a price return and a total return index. The ticker for the former is .DJI, and for the latter, it’s .DJITR. A price return index does not consider dividend payments, while a total return index does. The total return index assumes that dividends are reinvested. Investors and the media usually refer to the Dow's price return index when discussing its value.

Buying individual stocks in the Dow Jones

There are different ways to invest in the Dow Jones. You can purchase individual stocks that are part of the index. In theory, it's possible to replicate the index by buying all thirty stocks yourself. However, there are drawbacks. Firstly, many of the stocks in the Dow Jones have a high share price, requiring a significant investment to buy all of them. Additionally, the index composition occasionally changes, which means you, as an investor, need to actively monitor and make the necessary adjustments. Another way to invest in the Dow Jones is through an actively managed fund or an exchange-traded fund (ETF).

Investing in the Dow Jones with ETFs

An ETF is a product that tracks an index, commodity, bond a combination of products. The goal of an ETF is for its performance to closely match the value of the underlying products. While owning a share makes you a partial owner of a company, with an ETF, you are buying a product that simply tracks the value of the underlying assets.

History of the Dow Jones

The idea for the Dow Jones came from reporter Charles Dow in 1896. He is also the individual where the index gets its namesake from. Along with two other reporters, they owned Dow Jones & Company, which provided financial news to a broad audience. They had previously founded The Wall Street Journal in 1889. After the passing of Charles Dow in 1902, the company was bought by Clarence Barron and Jessie Waldron. The control then passed onto the Bancroft Family, who sold it to News Corp. in 2007. Nowadays, the Dow Jones index is owned by S&P Dow Jones Indices, which is itself a part of S&P Global. The company oversees numerous other stock indices, including the S&P 500, another influential indexes on the American market. The initial value of the Dow Jones Industrial Average was 40.94. During the major crisis in the late 1920s, the index dropped nearly 90% over a few years. In the late 20th century, the index surpassed the 10,000-point mark for the first time. It has since crossed the 30,000-point threshold.

The information in this article is not written for advisory purposes, nor does it intend to recommend any investments. Please be aware that facts may have changed since the article was originally written. Investing involves risks (e.g price volatility, currency or liquidity risk). You can lose your invested funds. Consider your knowledge and experience when making investment decisions. Past performance is not a reliable indicator of future results. Markets are volatile and can fluctuate significantly due to economic, political, regulatory, or other developments.

Sources: News Corp, S&P Global, The Wall Street Journal

Below are some of the stocks listed on the Dow Jones.

Symbol Name
AAPL Apple
BA Boeing
KO Coca Cola
IBMA

IBM

INTC Intel
JNJ Johnson & Johnson
MCD

McDonald’s

MSFT Microsoft
NKE Nike
CRM

Salesforce

DIS Walt Disney
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Investing involves risks. You can lose (a part of) your invested funds. We advise you to only invest in financial products which match your knowledge and experience. This is not investment advice.

Investing involves risks.

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