UnitedHealth Group has the largest weight in the Dow because of its high share price (in the $400-$500 range the past year versus Apple’s $150-$250), despite having a market cap that is less than 20 percent of Apple’s. The Dow Jones Industrial Average (DJIA) is composed of 30 large, publicly traded companies that are considered to be representative of the U.S. stock market. These companies come from various sectors of the economy, including technology, healthcare, finance, retail, and more. Welcome to Investing.com’s comprehensive guide on the Dow Jones Industrial Average (also called “the Dow Jones”, “the Dow”, “US 30” and the “DJIA”), one of the most prominent U.S. stock market indices.
Comparison with Other Indexes
Not surprisingly, these drops coincided with times of financial instability in the U.S. There was originally a delay of about seven minutes between the close of the NYSE to the final number, which came out over the wires. Electronic technology eventually enabled a constant minute-by-minute calculation of the average while the market trades. The transportation and utility industries are not included in the DJIA.
And it’s no wonder since it’s considered to be a bellwether of the U.S. economy. It is made up of 30 of the largest public companies in the country, which trade on the NYSE and the Nasdaq. The largest single-day percentage drop in the DJIA was on Oct. 19, 1987, when the index dropped over 20%. The second-largest decline occurred on March 16, 2020, when it dropped 12.9%.
- Not surprisingly, these drops coincided with times of financial instability in the U.S.
- The rest are chosen from all the major sectors of the economy, including information technology, entertainment, and financial services.
- Since then, it’s changed many times—the very first came three months after the 30-component index launched.
- For many investors, S&P 500 index funds remain the go-to choice for long-term investing—and for good reason.
- These different U.S. indices offer investors a more comprehensive and nuanced view of the stock market, allowing for analysis and benchmarking across various segments and industries.
The Dow Jones Industrial Average (DJIA) tracks thirty of America’s biggest and most established companies, acting like a quick temperature check of the U.S. economy.
Here are some key historical milestones for the Dow:
The committee reviews potential candidates and evaluates their eligibility based on the criteria above. Changes in the composition of the Dow Jones occur periodically to ensure it remains representative of the evolving U.S. economy. Over time, the Dow Jones Index evolved and expanded its scope to include various sectors beyond just industrial companies. The composition of the index has changed numerous times as companies have been added or removed to maintain its relevance and representativeness.
It is used as a benchmark for many investments and is considered to be a gauge of the American economy. Let Britannica Money introduce you to the world of stock indexes, how they’re used as financial benchmarks, and how to get started as an index investor. The list of companies in the DJIA is a mix financial advisor fees of firms from different sectors, which helps balance the index.
What the Dow Jones Industrial Average (DJIA) Measures
Initially, the DJIA consisted of just 12 stocks, reflecting the industrial powerhouse of the late 19th century. Over time, it expanded to include 30 stocks, becoming a more comprehensive representation of the U.S. economy. The Dow Jones Industrial Average (DJIA), often called the Dow Jones or simply the Dow, is a stock market index that tracks 30 of the largest and most influential U.S. companies. Created in 1896, it serves as a key indicator of the U.S. stock market and economic health. While the index represents U.S. companies, investors from around the world can typically invest in it, subject to local laws and regulations. These restrictions can vary from country to country and may include factors such as residency, citizenship, minimum investment thresholds, or eligibility criteria set by brokerage firms or investment platforms.
- Over time, the Dow Jones Index evolved and expanded its scope to include various sectors beyond just industrial companies.
- Throughout its history, the Dow Jones Index (DJIA) has witnessed significant milestones and market events.
- Instead of dividing by the number of stocks in the average, as is done in an arithmetic average, the sum of the component stock prices is divided by a special divisor.
- The Dow was created by Charles Dow, and Edward Jones, co-founders of Dow Jones & Company.
First Major Milestones
The DJIA is simply a reflection of the weighted average of the stock prices and can be considered a price in itself. If the quote moves down by 80 points at the time of closing, it means you can get the stocks for $80.00 less (taking into account the divisor), and they are less valuable than the previous day. Overall, a rise in the Dow signifies a rise in the share prices of constituent companies that reflect a positive outlook and vice versa. The Dow is also a price-weighted index instead of being weighted by market capitalization.
Step up your investment game and start investing like a pro to reap the rewards. Please keep in mind that the percentage changes provided represent the overall increase or decrease over the specified time periods. It’s important to analyze historical returns in conjunction with other factors and conduct thorough research before making any investment decisions.
Dow Jones Industrial Average: Composition and Calculation
Copyright © 2025 FactSet Research Systems Inc.Copyright © 2025, American Bankers Association. SEC fillings and other documents provided by Quartr.© 2025 TradingView, Inc. The Dow Jones Industrial Average is one of the most widely-tracked indexes in the world.
But the classic three Dow Jones averages—plus the composite that adds them together—focus on industrial, transportation, and utilities stocks in the U.S. Stocks with higher share prices are given greater weight in the index. So, a higher percentage move in a higher-priced component will have a greater impact on the final calculated value.
That cemented the relationship between the Dow’s performance and the overall economy. Even today, for many investors, a strong-performing Dow equals a strong economy, while a weak-performing Dow generally means a slowing economy. A rising Dow Jones generally suggests economic optimism, with investors confident about the future. Conversely, a declining Dow can signal a downturn or economic uncertainty. In this article, we will explain what the Dow Jones Industrial Average is, how it functions, and why it is so important to investors, analysts, and policymakers.