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?
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):
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):
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:
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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.