How DJIA Works
As an investor, it is very common that you will hear something about the Dow Jones Industrial Average every other day. You can understand more about investing if you know the basics. You will even understand how the Dow Jones flows. With an index, you will be able to know how a specific group of stocks works. You will also know the particular group is doing in the market. You can use various indices measuring the performance of small or large companies. The average in Dow Jones represents a stock market index. Investors then use this stock market index to understand the performance of the whole market better.
Charles Dow introduced the Dow Jones Industrial Average. It was one of the first market indices in the whole world. When it started, it had 12 stocks. Charles Dow added different prices of every company, and he then divided that number with the total number of stocks. Currently, Dow Jones Industrial Average has various indices. The Dow Jones is now made of made of 30 companies but, they are all not involved in the industrial business here.
A price-weighted number is used when it comes to finding Dow today. This is because, in the current investments, things have been complicated by mergers, acquisitions and even splits. All these elements have to be accounted for. The amount of a particular stock weight is dependent on the cost of that share. The index cannot be balanced in a case where the price of the stock goes up or down. With Dow Jones Industrial Average, you will be getting the weighted average price of the 30 stocks it has. If Dow points go up at the end of the day, it means that stocks will be trading for a higher amount than they were trading before. Check more about stock market in the homepage.
The 30 stocks of the Dow are corporations, and some include household names. There are stocks I which competitors in the same industry give information on how their businesses are doing. Leaders in different companies also provide information on how their businesses are performing. Sometimes a Dow Jones stock can be added or removed from the list. As stock prices rise and fall, there are Dow Jones tickers that show how different market indices are doing. You can see if stocks are doing better and this will mean that the overall prices are higher. If the prices are lower than the previous day, it means stocks are not doing well. Learn more about stock market in this website https://kids.britannica.com/students/article/stock-market/277903.