The Dow Jones Industrial Average has a history of more than 120 years, since it was introduced in 1896. It is the oldest of the three stock indices and one of the best-known stock indices in the world.
To give investors a measure of the business cycle, the Dow is presented in a format known as “price-weighted.” Simply put, you add up the stock prices of the individual components and divide them by the total number of stocks (30).
The 30 stocks are the largest or best-known publicly traded companies in the world, including Goldman Sachs, McDonald’s, Microsoft and Boeing.
The methodology comes from Wall Street Journal editors, who regularly use 30 of the tens of thousands of companies as benchmarks for the Dow. Because of such a wide selection, the companies chosen by the Dow are usually the best in their industry.
Therefore, the Dow Jones Industrial Average is also a barometer of economic market changes. The Dow, one of the three major indexes, can be viewed on the stock market page of the Tiger trade app.
What else should you know
Although the Dow Jones Industrial Average is one of the oldest and most widely followed stock indexes, more than a few experts believe that with only 30 major companies, it is not representative of the entire US stock market compared to broader market indexes such as the S&P 500 or the Russell 3000.
Although the Dow Jones Industrial Average has the word “industry” in its name, most of the 30 companies that make up the index today have little to do with industry, as positions have changed over time.
