What is the Dow 30?
The Dow 30, commonly known simply as “Dow” or “Dow Jones Industrial Average”, was created by Wall Street newspaper editor Charles Dow and got its name from Dow and its business partner Edward Jones. The index was developed as a simple way to track the performance of the US market at a time when the flow of information was often limited. The combined price of the shares of these 30 large publicly traded companies determines the Dow Jones Industrial Average. As one of the best stocks in the market, the belief is that the Dow 30 represents a solid assessment of general market health and trends.
Dow Jones industrial average
Understanding the Dow 30
The Dow was launched in 1896 and included only 12 companies that were considered important to the American economy at the time. The mix included a diverse fabric from tobacco to GE to coal and iron and leather which were essential to the American economy. The Dow Jones expanded to 30 stocks in 1928, where it remains today, as a spin-off of the Dow Jones Transportation Average (which consisted mainly of rail problems in the early years). The composition of the index changes regularly, as the stocks and the industries it represents fall in favor or not.
Over time, however, its composition has changed to reflect changes in the country’s economy. For example, the telecommunications giant AT&T, which was added to the Dow 30 in 1916, was replaced by the technology giant Apple Inc. (AAPL) in 2005.
The Dow 30 Companies
|Dow Jones industrial average|
|Company Name||Stock exchange code|
|Johnson & Johnson||JNJ|
|Procter & Gamble||PG|
|Travelers Companies Inc.||TRV|
|United Health||A H|
|Walgreens Boots Alliance||WBA|
Key points to remember
- The Dow 30, also known as the Dow Jones Industrial Average (DJIA), consists of 30 stocks designed to reflect the performance of the American market. Its composition reflects the dominant sectors that propel the American economy.
- While the two have the same objectives, the DJIA and the S&P 500 are different from each other.
The Dow 30 and the S&P 500
Comparisons are often made between the Dow Jones Industrial Average (DJIA) and the S&P 500. Although the two use the same strategy for measuring stock market performance through representative companies, there are significant differences in their methodology. For example, the DJIA is weighted based on prices while the S&P 500 is weighted based on market capitalization. They also use very different criteria to include companies in their lists.