What is Dow Jones?
Dow Jones or Dow or DIJA represents a stock index of 30 blue-chip industrial and financial companies in the United States. The Dow Jones index is price-weighted and does not account for changes in market capitalization. Dow Jones & Co. was founded in 1882 by Charles Dow, Edward Jones, and Charles Bergstresser.
What is Dow Jones today?
In the real-time chart below, let us see how much is the dow jones right now and Dow Jones change today:
Dow Jones industrial average index real-time
If you have a passion for investing in stocks and shares, then it is pretty apparent that you would have come across DOW JONES. When we talk about this stock index, we should have a reasonably good idea about DJIA. It tracks the movement of the most famous, large, and publicly owned companies that are from the blue-chip category. The shares and stocks that are part of DJIA are traded quite extensively on the NASDAQ and NYSE.
It would be pertinent to mention here that Dow Jones has been christened in commemoration of C. Dow. He gave birth to this index way back in 1896 with Edward Jones, his business partner.
Why is it called Dow Jones? Dow Jones index got its name based on two founders Charles Dow and Edward Jones (Dow + Jones).
There are a few things unique about DJIA. It stands second as far as the age of stock indexes is concerned. The first one being DJTA. The main objective of DJIA was to be a barometer of the economy of this country from a broader perspective. If you are looking for a benchmark index for the USA’s best stocks, there are reasons to believe that it is the best. It is an index based on price weightage, and as mentioned earlier, it tracks the best and widely traded shares.
There is no doubt that this an overall index in the USA and across the world. All the firms that make up the DJIA can easily be classified as top-notch companies. They boast of stable earnings, consistently and continuously. Some big names that are part of DJIA are Microsoft Corporation and many other such big words.
The DJIA has traveled quite a distance since it began its journey. When it started, DJIA had only two companies. Most of these 12 companies were from various sectors covering sugar, gas, cotton, railroads, tobacco, sugar, etc. It also would be interesting to mention here that in the early part of the last century, the economy was almost totally dependent on major industrial companies’ growth, as discussed above. Even today, a strong Dow is seen as a reflection of a strong U.S economy. However, the index composition changed with time. There are many instances where a company has been taken off from the DJIA list and replaced with a new, purely based on merit and performance. Suppose a company ends up losing a significant portion of its market capitalization because of various reasons. In that case, it gets replaced by a new company that has the credentials and money to replace the outgoing company.
Dow Jones Chart 10 Years
Below is presented Dow Jones 10 years chart:
Dow Jones U.S. Small-Cap Total Stock Market Index
Below is presented last 10 years’ chart of the Dow Jones small-cap index. Dow Jones adjusted for inflation index showed interesting return. Dow Jones average annual return last 10 years was 10.43% for small caps (annualized for inflation).
Dow Jones historical chart – Dow Jones 100 year chart
Below is presented closing price of the Dow Jones industrial average for the last 100 years:
Dow jones historical prices by year – Dow Jones industrial average historical annual data
This Dow Jones graph above presents historical closing prices for the Dow index from 1915 till 2021. The first increase in price Dow had in 1980. Dow Jones 1980 till 2000. increased up to $10000. If we analyze the Dow Jones industrial average’s closing price, we can see the rapid gain in the last 10 years. Dow Jones’s 100-year chart showed that in 2007 Dow’s industrial average price was $12050 while in 2009 went down to $6547. So in just two years, Dow’s price has halved. After that, from $6547 in just 12 years, the Dow price has risen above $3000.
Dow returns by year – Dow Jones historical prices by year from 1915
|Year||Dow Year Open||Dow Year High||Dow Jones Year Low||Dow Year Close||Annual||% Change|
What is the average return for the Dow Jones?
Below is the calculated average return for the Dow index from 2011-2021, 2001-2021, and 1991-2021.
What is Dow Jones’s average return for the last 10 years?
- The total Dow Jones Industrial Average Return for the last 10 years adjusted for inflation is 122.010%.
- Annualized Dow Jones Industrial Average Return for the last 10 years adjusted for inflation is 8.302%.
- Total DJIA Return (Dividends Reinvested) for the last 10 years adjusted for inflation is 180.419%.
- Annualized DJIA Return (Dividends Reinvested) for the last 10 years adjusted for inflation is 10.862%
What is Dow Jones’s average return last 20 years?
- The total Dow Jones Industrial Average Return for the last 20 years adjusted for inflation is 109.782%.
- Annualized Dow Jones Industrial Average Return for the last 20 years adjusted for inflation is 3.774%.
- Total DJIA Return (Dividends Reinvested) for the last 20 years adjusted for inflation is 238.185%.
- Annualized DJIA Return (Dividends Reinvested) for the last 20 years adjusted for inflation is 6.282%
What is Dow Jones’s average return last 30 years?
- The total Dow Jones Industrial Average Return for the last 30 years adjusted for inflation is 454.899%.
- Annualized Dow Jones Industrial Average Return for the last 30 years adjusted for inflation is 5.878%.
- Total DJIA Return (Dividends Reinvested) for the last 30 years adjusted for inflation is 1027.519%.
- Annualized DJIA Return (Dividends Reinvested) for the last 30 years adjusted for inflation is 8.410%
Dow Jones historical data in Excel
Dow Jones market capitalization
Market capitalization or market cap is the total market value of the company’s outstanding shares. To calculate a company’s market capitalization, you need to multiply the current stock price by the total number of shares. Dow Jones market capitalization in 2020 was around 8.94 trillion dollars.
Stocks having better value are the ones that carry greater weight as far as the overall index is concerned. Earlier, the average was calculated by dividing the price of 12 stocks after summing up the stock prices on a particular day. This has gone through many changes over time, and it may have happened because of many reasons. Stock splits, mergers and acquisitions may have led to these changes over time.
Dow Jones components
Dow Jones components represent 30 stocks that are price-weighted. The Dow 30 or DIJA index is calculated using a divisor to normalize the index components.
Dow Jones components are the following 30 companies:
|Company||Symbol||Industry||Date added||Index weighting|
|UnitedHealth Group||UNH||Managed health care||9/24/2012||7.12%|
|Goldman Sachs||GS||Financial services||9/20/2013||6.97%|
|The Home Depot||HD||Retailing||11/1/1999||5.42%|
|Boeing||BA||Aerospace and defense||3/12/1987||5.00%|
|Visa Inc.||V||Financial services||9/20/2013||4.55%|
|Caterpillar Inc.||CAT||Construction and Mining||5/6/1991||4.50%|
|The Walt Disney Company||DIS||Broadcasting and entertainment||5/6/1991||3.97%|
|Johnson & Johnson||JNJ||Pharmaceutical industry||3/17/1997||3.24%|
|JPMorgan Chase||JPM||Financial services||5/6/1991||3.16%|
|The Travelers Companies||TRV||Financial services||6/8/2009||3.16%|
|American Express||AXP||Financial services||8/30/1982||2.99%|
|Procter & Gamble||PG||Fast-moving consumer goods||5/26/1932||2.59%|
|Apple Inc.||AAPL||Information technology||3/19/2015||2.44%|
|Chevron Corporation||CVX||Petroleum industry||2/19/2008||2.27%|
|Merck & Co.||MRK||Pharmaceutical industry||6/29/1979||1.52%|
|Dow Inc.||DOW||Chemical industry||4/2/2019||1.31%|
|The Coca-Cola Company||KO||Food industry||3/12/1987||1.05%|
|Walgreens Boots Alliance||WBA||Retailing||6/26/2018||1.03%|
|Cisco Systems||CSCO||Information technology||6/8/2009||0.98%|
The index has to be often re-valued to accommodate new entrants and, after taking into account, firms or companies that may have been forced to move out for various reasons. The number of companies moved to 30 way back in 1928. However, what is pertinent to mention here is that the Dow Index composition has changed around 60 times since 1928. The first change happened about three months after the component index of 30 was created. The Great Depression saw many changes to its overall components. One of the most significant changes perhaps happened in 1932, when eight out of thirty stocks in the DOW had to be replaced.
There have been many changes to the composition of the Dow over the past 125 years or so. One of the most significant changes happened in 1997 when Bethlehem Steel, Texaco, Woolworths, and Westinghouse Electric were replaced by Johnson & Johnson, Hewlett-Packard, Travelers Group Wal-Mart, respectively.
In 1999 some more changes happened when Union Carbide, Chevron, Sears Roebuck, and Goodyear Tire were shown the door, and in their places, Intel, Home Depot, SBC Communications, and Microsoft were added. Many other changes to the composition of the 30 happened in 2018 and 2020. Therefore, such changes are part and parcel of the journey of DJIA, and most certainly, many more changes to the composition will happen over the years.
What are 30 stocks in the Dow Jones?
Dow Jones companies list is:
- 3M Company
- American Express
- Apple Inc.
- Caterpillar Inc.
- Chevron Corporation
- Cisco Systems
- Dow Inc.
- Goldman Sachs
- Johnson & Johnson
- JPMorgan Chase
- Merck & Co.
- Procter & Gamble
- The Coca-Cola Company
- The Home Depot
- The Travelers Companies
- The Walt Disney Company
- UnitedHealth Group
- Visa Inc.
- Walgreens Boots Alliance
How is the Dow Jones calculated?
Dow Jones index value represents the sum of all 30 stocks’ prices divided by a Dow divisor. Dow Jones index calculation is based on price-averaged calculation and determining Dow divisor. The Dow divisor is a figure used to normalize the value of the Dow Jones Industrial Average, and it is regularly updated to ensure that structural changes to the market.
Over a while, a new concept known as Dow Divisor was used as a constant for calculating the DJIA index. The constant was predetermined and helped determine the impact of a single point move as far as the 30 stocks are concerned. However, there are situations and times where the divisor had to be changed to ensure that the overall value of the DOW remained consistent. The divisor, of course, keeps change, and you find it out by referring to various sources of information. The WSJ or the Wall Street Journal gives the interested stakeholders the latest divisor.
Not many people may be aware that the DOW index is not calculated using the WAA or the Weighted Arithmetic Average. Therefore it may not be an accurate reflection of the overall market capitalization of the various components of DJIA. However, this is not the case with other indexes like S&P 500 and others. The Dow Index is the total share of stocks’ price movement as far as all the components are concerned after being divided by the divisor number mentioned above. In a practical situation, if there is a single point movement in any single stocks that make up the 30 total numbers, this will move the index by the same number of points.
Is Amazon in Dow Jones?
No, Amazon company is not in the Dow Jones index. Amazon needs to split its shares by 10-to-1 or more to reduce them to a level at which Dow Jones can consider this company. Dow index can not accept share that is more than $3000 such as Amazon. Amazon didn’t split its stock since 1999. This is the biggest problem for the Dow Jones index because some big and excellent companies are not listed. In 2020, the Dow rose just 7.3%, while the Nasdaq gained 24%, and the S&P 16%.
What’s the difference between the Dow Jones and the NASDAQ?
Dow Jones Industrial Average consists of 30 major companies traded on the NYSE, while the NASDAQ index has more than 3000 companies. Dow index is based on average price calculation where the stock split is not considered. In contrast, NASDAQ is based on the average Market capitalization (Price * Outstanding shares) of the companies index. The NASDAQ stock market depends largely on the technology sector’s performance, while Dow’s performance is focused on the 30 major companies as a group and not as individual stocks.
To conclude, some critics strongly believe that a stocks’ price may not be the right way to reflect a company’s overall performance that belongs to the list of the 30. Market cap is perhaps a more accurate way of looking at the strength and possible weaknesses of companies.