Dow Jones & Co. was originally founded in 1882 by Charles Dow, Edward Jones, and Charles Bergstresser, according to Investopedia. At first, Dow Jones & Co. focused on growth stocks, but gradually evolved to become the Dow Jones Industrial Average in 1896.
Who are DJIA members?
According to CNBC, the he 30 companies currently included in the DJIA as of Oct. 2, 2020 are American Express, Amgen, Apple, Boeing, Caterpillar, Cisco Systems, Chevron, Goldman Sachs, Home Depot, Honeywell International, IBM, Intel, Johnson & Johnson, Coca-Cola, JPMorgan Chase, McDonald’s, 3M, Merck & Co., Microsoft, Nike, Procter & Gamble, Travelers Companies, UnitedHealth Group, SalesForce.com, Verizon Communications, Visa, Walgreens Boots Alliance, Walmart, Walt Disney, and Dow Inc.
How does the DJIA work?
The Dow Jones Industrial Average is a price-weighted index, which means that it doesn't take market capitalization into account. Greater weight is given to companies with a higher stock price. Forbes explains that the DJIA “does not account for market capitalization, which is the total market value of all of a company’s shares.”
How are DJIA companies chosen?
Motley Fool explains that Dow components are chosen by the S&P Dow Jones Indices, without specific rules for who may be included. Companies in the DJIA are usually large, well-respected companies with a long record. However, they aren't necessarily the largest 30 companies in the market.
The 30 companies on the Dow Jones Industrial Average create a fairly broad overview of the U.S. economy, even though it's a more limited index than the S&P 500 and Nasdaq. “Despite all its shortcomings, the Dow is still one of the most-watched indicators for stock market performance and the shape of the U.S. economy.”