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. Determining whether the Dow Jones is “better” than other indices depends on the specific criteria used to evaluate them (for what is the difference between data and information with examples example its size, benchmarking, methodology, annual returns and so on).

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The DJIA is considered a bellwether of the stock market and the U.S. economy as a whole. Although investors can’t invest directly in the index, they can park their money in a mutual fund or ETF that tracks the performance of the Dow Jones. The Dow’s approach is unlike other leading indexes used to track the overall performance of the stock market, like the S&P 500 or the Nasdaq Composite. These consider a company’s market capitalization when determining how much influence it will have in an index.

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1. The DJIA initially launched with just 12 companies based mostly in the industrial sectors.
2. They are commonly used as a guide for the U.S. economy and, more specifically, to provide insight into the state of the stock market.
3. These assets are normally comprised of the same companies that make up the index.
4. The Dow Jones Industrial Average (DJIA) is an indicator of how 30 large, U.S.-listed companies have traded during a standard trading session.

The composition of the index has changed numerous times as companies have been added or removed to maintain its relevance and representativeness. The Dow was created by Charles Dow, and Edward Jones, co-founders of Dow Jones & Company. The index was initially designed to provide a snapshot guide to broker-dealer registration of the performance of the industrial sector, which played a vital part of the American economy at that time.

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The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. When a company undergoes significant changes, such as a merger, acquisition, or substantial shifts in its business model, or when there’s a need to better represent the current state of the economic sectors, adjustments are made. These changes are not done often to ensure the index’s stability and continuity. The largest single-day drop, percentage-wise, that the Dow has had occurred when the market crashed on Oct. 19, 1987, Black Monday. However, in points, the Dow’s worst day was March 16, 2020, when it fell 2,997.1 points in reaction to the pandemic-era adoption of lockdowns throughout the U.S. and the Federal Reserve slashing interest rates to near zero. The Dow and the S&P 500 are probably the two most well-known stock market indexes, but there are a couple of key differences between the two.

Certain corporate actions, like dividend going ex (i.e., becoming an ex-dividend, wherein the dividend goes to the seller rather than to the buyer), can lead to a sudden drop in DJIA on the ex-date. High correlation among multiple constituents also led to higher price swings in the index. As illustrated above, this index calculation may get complicated on adjustments and divisor calculations. In the case of (2), the net sum price change was 0 (stock A had +5 change, while stock B has -5 change, making the net sum change zero). Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018.

Editorial integrity

In 1882, they established Dow Jones & Company as a prominent financial news and information company, which went on to become a leading source of business and market data and later developed the Dow Jones Index in 1892. Journalist Charles Dow xemarkets to hold a live seminar at lse and his business partner, Edward Jones, established the Dow Jones Industrial Average in 1896 with 12 companies in the industrial sector. The number of companies included in the index increased to 20 in 1916 and then to the current number, 30, in 1928. Since its inception, the Dow has remained among the most frequently discussed and commonly tracked equities indexes. The Dow Jones Industrial Average, also known as the Dow or DJIA, tracks 30 large, well-known companies that trade on the New York Stock Exchange and Nasdaq. The Dow’s all-time high at market close stands at 39,908.00, reached on May 15, 2024.

Dow Jones & Company (acquired in 2007) is currently owned by News Corp, a global media and information services company. The Dow Jones is not physically based in a specific location as it exists as a virtual index. However, Dow Jones & Company, the publisher of the index (alongside other financial publications), is headquartered in the United States, with its main offices in New York City. It is important to note that the Dow Jones Industrial Average is an index created by Dow Jones & Company – the company and the index are not interchangeable. The Dow Jones Industrial Average was established on May 26, 1896, by Charles Dow, who founded Dow Jones & Company — parent company of The Wall Street Journal — in 1882 with fellow journalists Edward Jones and Charles Bergstresser. According to S&P Global, the Dow Jones Industrial Average is a “world-renowned gauge of the U.S. equity market.” Most Dow Jones Industrial Average-listed companies trade on the New York Stock Exchange.