The Dow Jones Industrial Average top performing stocks
When one investor asks another how the market is doing, chances are they are asking what the Dow Jones Industrial Average is doing. This list of 30 large, publicly owned companies, all based in the United States, is one of several stock market indices published daily by The Wall Street Journal. Named after its founders, Charles Dow and Edward Jones, the average is one of the oldest stock market indices. The word “industrial” in the title is largely historical, since the stocks are not necessarily industrial companies. Today’s diverse list includes consumer products, technology, energy and finance companies. Stocks selected to become part of the DJIA are believed by its compilers (Dow Jones & Company) to provide a broad portrait of the U.S. economy.
The average (sometimes referred to as the DJIA or simply the Dow) is believed to be the world’s best-known market indicator in part because it is more than 100 years old, so many generations of investors have come to view it as “the market.” The DJIA It is not simply a sum of the stock value of the companies on the list divided by 30. Rather, it is adjusted to reflect price changes whenever one of the component stocks splits or pays a stock dividend in order to generate a consistent value for the index. Moreover, the names in the list change from time to time, so today’s list bears little resemblance to the original index. When companies are replaced, the devisor used to calculate the index is also adjusted.
The DJIA is one of several Dow Jones Averages, ranging from the august Dow Transportation and Utilities Indexes and the and many newer cousins like the Dow Jones Emerging Market Indexes, a diamond index, indexes that focus on sectors or types of stocks, such as dividend-paying stocks. The feature that all the DJIA companies have in common is that they are large, widely owned companies and these tend to be leading companies – often referred to as “Blue Chips.” Bear in mind, however, that the DJIA is not composed of the best-performing stocks either in the United States or in the world. Small and foreign companies often beat the DJIA. If you buy all 30 stocks in the index, you will own a portfolio of Rolls Royces and Cadillacs, but your neighbor with a less classy stock collection might do better than you do.
Since the components of the DJIA change, you would have to stay on top of all the changes, and that could become expensive. A more practical approach would be to buy an Exchange Traded Fund (ETF) or a mutual fund designed to mirror the index. <<http:// www.investorguide.com/igu-article-414-etfs-index-funds-and-etfs.html>>