What is Dow Jones Index?

What is the DOW?

The DOW is a stock market index which is listed on the New York Stock Exchange and the NASDAQ. It is referred to with many names DOW JONES Industrial Average, DOW 30 or simply just DOW. The DOW consists of a group of 30 components which makes it the only other index besides the DAX 30, which also houses only 30 components. An interesting fact of this index is, to form a part of this elite group a company need not be among the Top 30 in terms of market value. DOW in particular has no rules for selection; components are selected on basis of investor demand, sustained growth of the company and the overall performance of the company.

The Dow has a number of other sister indexes Dow Jones Transport Average, Dow Jones Utility Average, DJ Composite Average, Dow 5, Dow 10,Global Dow and the Dow Derivatives are traded on the Chicago Stock Exchange.

The DOW Jones Industrial Average was incorporated on the 26th May 1896 and was founded by Charles Dow and created by the Wall Street Journal. Today the DOW is owned by S&P DOW Jones an index which is fully owned by McGraw-Hill Financial.

The market capitalisation of the NYSE is $16 trillion and volumes are close to $20 trillion, the Dow 30 contributes to approximately 45% of this. The market value of the DOW 30 $8 trillion, which is larger than the market capitalization of major stock exchanges of the world. The Dow Jones actually represents one fourth of the value in terms of the stocks listed on the NYSE.

The Dow is also one of the oldest existing index and is one of the major index of the world’s biggest stock exchange: the NYSE.

Companies that form a part of the Dow Jones

Companies that form a part of the Dow30 are some of the biggest in the world, with marketing bases all over the globe. Considering that the USA is the world’s biggest economy, the companies that form a part of this group are some of the biggest service providers and goods manufacturers in their field. The companies provide services in finance, telecommunications, defence, aerospace engineering, oil and natural gas, chemicals, banking, pharmaceuticals, fast food, insurance etc.

American Express
Goldman Sachs
Johnson & Johnson
JP Morgan Bank
The Home Depot
United Technologies
United Health Group
Walt Disney

Some Former Components:

• Alcoa
• Bank of America
• Kraft
• General Motors
• Citigroup
• Altria Group
• Honeywell
• Eastman Kodak

Top 10 Dow Components by yield:

The First Components of the Dow:

• American cotton Oil Company / now Unilever
• American Sugar Company / Now Domino Foods
• American Tobacco Company / no more
• Chicago Gas Company / now Integrys Energy
• Distilling and cattle feeding company / bankrupt
• Laclede Gas Company / Removed from Dow
• National Lead Company / Removed from Dow
• North American Company / dissolved
• U.S. Steel / removed from Dow
• U.S. Leather Company / dissolved
• United States Rubber Company / now a part of Michelin

Future of the Dow:

As financial uncertainties loom over the world economy from time to time, it is much of a chain reaction to see world markets responding with losses. The Dow however has always had a history of recovering from the worst financial circumstances. It would be always advisable to invest your faith in the Dow and continue investing in it. From the beginning of the year 2000 till date the Dow has faced many ups and downs but the overall gain in index value still remains a good 55%+.