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Dow Jones Industrial Average Index (DJIA)
Current Value
10,584.34
-0.64%
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What Is It?
At 100+ years, the DJIA is the oldest continuing U.S. market index. It is comprised of 30 blue chip stocks whose one binding similarity is their hugeness -- each has sales per year that exceed $7 billion. The DJIA is the best-known market indicator in the world, partly because it is old enough that many generations of investors have become accustomed to quoting it, and partly because the U.S. stock market is the world's most valuable.
Fun Fact
Only one of the original 12 DJIA stocks is in the index today. (Hint: David Letterman used to have a heyday poking fun at it when his show was carried on NBC, one of this company's divisions.) Answer: General Electric. |
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Recent Performance
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Year-to-Date
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- 1.88%
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1-Year
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- 9.71%
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3-Year
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+ 36.51%
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Financial Statistics
(as of 12/31/99) |
| Total Market Value |
$4.17 trillion |
| Mean Market Value |
$9.17 billion |
| Median Market Value |
$100.46 billion |
| Average P/E |
24.1 |
| Dividend Yield |
1.47% |
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Type of Companies
Large-cap companies representative of U.S. industry. It includes such powerhouses such as Proctor and Gamble, Home Depot, Coca Cola. In essence, it is designed to represent almost any U.S. company that isn't in the transportation business or isn't a utility. Substantial industrial companies with a history of successful growth and wide interest among investors are considered.
Number of Companies
30
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Top 10 Weighted Companies
(as of 6/23/00) |
| Intel Corp. (INTC) |
7.4% |
| J.P. Morgan & Co. (JPM) |
6.5% |
| Hewlett-Packard (HWP) |
6.4% |
| IBM (IBM) |
6.1% |
| Johnson & Johnson (JNJ) |
4.1% |
| 3M (MMM) |
4.6% |
| Exxon Mobil (XOM) |
4.5% |
| Microsoft (MSFT) |
4.2% |
| Merck & Co. (MRK) |
3.9% |
| Citigroup Inc. (C) |
3.4% |
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Industry Composition
(as of 6/28/00) |
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# of
cos. |
% of index |
| Basic Materials |
3 |
10% |
| Financial |
3 |
10% |
| Services |
6 |
20% |
| Capital Goods |
2 |
6.7% |
| Consumer (Non-Cyclical) |
3 |
10% |
| Consumer (Cyclical) |
2 |
6.7% |
| Conglomerates |
4 |
13.3% |
| Technology |
4 |
13.3% |
| Healthcare |
2 |
6.7% |
| Energy |
1 |
3.3% |
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How It Is Measured
The "average" is in the title because the index's performance was originally computed by adding up stock prices and dividing by the number of stocks. The methodology remains the same today, but the divisor has been changed to preserve historical continuity. The DJIA is a price-weighted index calculated daily based on the price of each company without any regard to the relative size of each component. |
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Strengths
The focus on mega-cap companies provides significant stability for the DJIA. Each company is recognizable to significant portions of the investing public. As the oldest, most highly referenced index, when people ask how "the market" has done, they are usually asking about the DJIA.
Weaknesses
Because it is restricted to U.S.-based companies -- and just 30 companies at that -- the DJIA is not very diverse. Because, by definition, it focuses largely on industrial companies, in the information age it may not accurately reflect the performance of large swaths of the U.S. or global marketplace
Investing in the DJIA
The DJIA has several financial products related to it, including index funds and exchange-traded funds. The companies of the DJIA are not likely to disappear -- they are some of the largest in the U.S. An investor looking for lower risk, capital preservation, and some income from dividends would be the ideal purchaser of products linked to the Dow.
Related Links
Historical Dow Jones averages are at your fingertips.
A Fool tells the history of the Dow. |
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Nasdaq »
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 Tom and
David Gardner discuss AOL Time Warner in Hour 1 of the Fool's radio show. |
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