The Dow Jones Industrial Average also known as DJIA was established in 1986 with the opening of 12 companies which included cotton, gas, railroads, tobacco, sugar, and oil.
Now, they own blue-chip companies trading and investigating the New York Stock Exchange (NYSE) and Nasdaq. Moreover, we can call DJIA a stock index tracking 30 companies right now.
Dow Jones Industrial Average is the second largest stock market in the US. However, the Dow Jones Transportation Average comes first on the list. Moreover, the purpose of designing DJIA was to serve as a protective shield for the US economy. However, there can be a downfall in the stock index.
In this article, we will move forward to look into the structure of the Dow Jones Industrial Average, criticism, and strategies for new investors.
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What is DJIA and Its Structure?
The Dow Jones Industrial Average (DJIA) is one of the top stock market indexes in the world right now. It was started in 1986 and includes 30 companies except the utilities sector. There is a way to calculate the simple average through the dow divisor. Here is the formula to calculate a point move in the stock index.
DJIA Price= Sum of Component Stock Price/ Dow DivisorÂ
Here is the list of companies that are working with the Dow Jones Industrial Average in 2024. We have sorted the list according to the years.
1930s
| Company | Symbol | Year |
| Procter & Gamble | PG | 1932 |
1970s
| Company | Symbol | Year |
| 3M | MMM | 1976 |
| IBM | IBM | 1979 |
| Merck & Co. | MRK | 1979 |
1980s
| Company | Symbol | Year |
| American Express | AXP | 1982 |
| McDonald’s | MCD | 1985 |
| Boeing | BA | 1987 |
| The Coca-Cola Company | KO | 1987 |
1990s
| Company | Symbol | Year |
| Caterpillar | CAT | 1991 |
| JPMorgan Chase | JPM | 1991 |
| The Walt Disney Company | DIS | 1991 |
| Johnson & Johnson | JNJ | 1997 |
| Walmart | WMT | 1997 |
| The Home Depot | HD | 1999 |
| Intel | INTC | 1999 |
| Microsoft | MSFT | 1999 |
2020s
| Company | Symbol | Year |
| Amgen | AMGN | 2020 |
| Honeywell | HON | 2020 |
| Salesforce | CRM | 2020 |
| Amazon.com, Inc. | AMZN | 2024 |
All these companies help Dow to generate a massive amount of revenue. Moreover, to start your journey with DJIA here are some tips and tricks that will help you to move forward.
Investment Strategies for New Investors
Investors who put their investments in Dow need to be careful while putting in their money as it can be a risk. If you are inexperienced in investing then first get your hands on the knowledge for investing. Here is the list of strategies you need to include.
Protective Put
It is the long-term investing in Dow exchange-traded fund (ETF). When the prices of stock go up your profit gets stronger. However, it protects the DJIA investment when it goes down.
Protective Short Selling
The short-selling for Dow ETF can help you protect your investment before DJIA goes down.
Covered Call
Buy a DJIA ETF and the investor can sell it through the buying and calling option. Moreover, this strategy works if the Dow remains relatively flat and will work until the stock price remains the same.
Is DJIA Better than Other Stock Companies?
Some people think that the number of companies in DJIA is less than the S&P. In the Dow Jones Industrial Average, there are only 30 companies and in the S&P there are 500 companies. Moreover, the price of stock depends on the market cap. The higher-priced stocks have more influence on the market cap.
- S&P tracks 500 stocks in the US market. Whereas, DJIA tracks 30 companies.
- The Dow Jones index is categorised as price-weighted and S&P is market-cap weighted.
- Stocks in Dow are appointed by committee and S&P 500 are added by formula.
Conclusion
The Dow Jones Industrial Average is a stock index that includes 30 blue chip companies that work on price-weighted in the US stock market. To maintain and represent the state of the company all decision is taken by the committee. However, if you find it difficult then you can also check on S&P 500.
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FAQs
What is DJIA used for?
DJIA is known as one of the best-known stock market indexes in the US market. Moreover, they aim to keep track of the movement of 30 American companies.
What does Dow stand for?
Dow is the same as the Dow Jones Industrial Average which works in the US stock market that handles 30 large American companies.
What does the DJIA number mean?
DJIA Price= Sum of Component Stock Price/ Dow Divisor
What is the DJIA named after?
It was founded by Charles Dow and his business associate Edward Jones. Both of them founded the company and named it as Dow Jones Industrial Average.
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