The Dow Jones Index: A Comprehensive Guide
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The Dow Jones Industrial Average (DJIA) is a stock market index that measures the stock performance of 30 large, publicly traded companies in the United States. It is one of the most widely followed stock market indices in the world and is often used as a barometer of the overall health of the U.S. economy.
The DJIA was created by Charles Dow and Edward Jones in 1896 and is the oldest stock market index in the United States. The index has been through many ups and downs over the years, but it has consistently grown over the long term.
The DJIA is calculated by taking the sum of the stock prices of the 30 companies in the index and dividing that by the Dow Divisor. The Dow Divisor is a number that is adjusted over time to keep the index relatively stable.
Constituents
The 30 companies that make up the DJIA are some of the largest and most well-known companies in the United States. They include companies from a variety of industries, including banking, energy, healthcare, and technology.
The companies that are included in the DJIA are reviewed regularly by the Dow Jones Industrial Average Committee. The committee can add or remove companies from the index based on their size, financial performance, and industry representation.
Performance
The DJIA has performed well over the long term. Since its inception in 1896, the index has grown at an average annual rate of 6.7%. This means that an investment of $100 in the DJIA in 1896 would be worth over $1 million today.
However, the DJIA is not without its risks. The index is heavily weighted towards large, well-established companies, which means that it can be slow to react to changes in the economy. Additionally, the index is not diversified across different industries, which makes it more vulnerable to downturns in specific sectors.
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