What Is the Dow Jones Industrial Average (DJIA)?
31
shares

What Is the Dow Jones Industrial Average (DJIA)?

Sudhan P
31
shares

Dow Jones Industrial Average (DJIA) 

Previously, we looked at what the S&P 500 index is all about.

Right now, let’s explore what “Dow Jones Industrial Average” means, shall we?

baby showing thumbs up
Source: giphy

So, the Dow Jones Industrial Average (DJIA) is a stock market index tracking 30 large companies listed on the US’ New York Stock Exchange (NYSE) and the Nasdaq.

DJIA made news on Thursday as it entered a bear market, ending an 11-year bull run and the longest in US history at that.

The index, which was launched in 1896, is named after Charles Dow and Edward Jones. DJIA is often referred to as the “Dow” too.

In the DJIA, components with higher share prices are given greater weight. Therefore, a higher percentage move in a higher-priced stock will have a larger impact on the index.

That means DJIA is price-weighted, as opposed to the S&P 500, which is market capitalisation-weighted.

Some of the stocks that belong to the DJIA are brand name companies such as 3M, American Express, Apple, Coca-Cola, Disney, Johnson & Johnson, Nike, and Visa.

The following shows the industry breakdown of the Dow, based on GICS sector classification (as end-February 2020):

Source: S&P Dow Jones Indices

Information technology (at 22.5%) occupies the bulk of the Dow, followed by industrials (18.1%), and financials (14.6%).

Over the last 10 years, DJIA has produced an annualised return of 8.3% (as of 12 March 2020, Singapore time):

Dow Jones Industrial Average performance past 10 years
Source: S&P Dow Jones Indices

If you wish to invest in the DJIA, you can do so by purchasing an exchange-traded fund (ETF) that tracks the index. An example would be the SPDR Dow Jones Industrial Average ETF, with an expense ratio (fees charged by ETF managers) of just 0.16%.

If you wish to learn more about investing in ETFs, you may want to check out our latest guide:

etf guide for beginners

Have Burning Questions Surrounding The Stock Market?

Why not check out Seedly’s QnA and participate in the lively discussion regarding stocks!

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
You can contribute your thoughts like Sudhan P here.

Still have more questions after reading the article? Fret not, ask our community here!

Stay updated with the latest finance tips!
Receive bite-sized finance on Telegram here.

What's Popular

    • Loading articles
    • Loading articles
    • Loading articles
    • Loading articles
    • Loading articles
Comments
31
shares

What's Popular

    • Loading articles
    • Loading articles
    • Loading articles
    • Loading articles
    • Loading articles

Still have more questions after reading the article? Fret not, ask our community here!