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The Dow Jones Industrial Common, also referred to as the Dow, is among the hottest inventory market indexes, together with the S&P 500 and Nasdaq Composite. The Dow tracks the inventory efficiency of 30 massive, blue-chip firms.
Listed below are the main points on the Dow Jones Industrial Common, together with which firms are included within the index and the way it’s calculated.
The next 30 firms are included within the Dow Jones Industrial Common as of February 26, 2024:
| 3M (MMM) | Amazon.com (AMZN) | American Specific (AXP) |
| Amgen (AMGN) | Apple (AAPL) | Boeing (BA) |
| Caterpillar (CAT) | Chevron (CVX) | Cisco Methods (CSCO) |
| Coca-Cola (KO) | Dow (DOW) | Goldman Sachs (GS) |
| House Depot (HD) | Honeywell Worldwide (HON) | Intel (INTC) |
| Worldwide Enterprise Machines (IBM) | Johnson & Johnson (JNJ) | JPMorgan Chase (JPM) |
| McDonald’s (MCD) | Merck & Co. (MRK) | Microsoft (MSFT) |
| Nike (NKE) | Procter & Gamble (PG) | Salesforce (CRM) |
| Vacationers (TRV) | UnitedHealth Group (UNH) | Verizon Communications (VZ) |
| Visa (V) | Walmart (WMT) | Walt Disney (DIS) |
How does a inventory get added to the Dow Jones Industrial Common?
In an effort to be included within the Dow, an organization have to be a part of the S&P 500 and can’t be a part of the transportation or utilities industries (S&P Dow Jones Indices has different indexes that monitor these areas of the economic system).
The S&P 500 itself has a number of necessities round issues resembling the corporate’s market capitalization, the place the inventory trades, profitability and buying and selling quantity.
Lastly, the Dow Jones Industrial Common is maintained by a committee that features three representatives from S&P Dow Jones Indices and two representatives from The Wall Avenue Journal.
As a result of the Dow is proscribed to 30 firms, when one firm enters the index, one other should depart. In February 2024, Amazon.com changed Walgreens Boots Alliance within the index.
The Dow Jones Industrial Common is a price-weighted index
The Dow is a price-weighted index, which implies the shares are weighted within the index primarily based on their share value. This may create some distinctive conditions, resembling an organization with a smaller market cap than different firms within the index having a bigger weight as a result of its share value is greater. Inventory splits have a very massive impression on price-weighted indexes because of this.
For instance, Apple is among the largest firms on the planet and, as of February 2024, has the second-largest weight within the market-cap-weighted S&P 500 primarily based on its market cap of $2.83 trillion. However within the Dow, it has simply the fifteenth largest weight, which relies on its share value of about $183. UnitedHealth Group has the biggest weight within the Dow due to its $522 share value regardless of having a market cap that’s lower than 25 p.c of Apple’s.
The value degree of the Dow is calculated by including the share costs of the businesses within the index and dividing by the Dow divisor, a determine that’s adjusted periodically for company actions resembling dividend funds and inventory splits.
Dow Jones Industrial Common vs. S&P 500
The Dow and the S&P 500 are in all probability the 2 most well-known inventory market indexes, however there are a few key variations between the 2.
- Diversification: The Dow consists of simply 30 massive firms, whereas the S&P 500 consists of about 500, making the latter a wider and extra diversified measure of the U.S. inventory market and American enterprise. Shopping for an S&P 500 index fund is usually a nice, easy funding for many particular person traders due to the diversification advantages it gives. A fund monitoring the Dow wouldn’t provide the identical advantages.
- Weightings: The S&P 500 is a market-cap-weighted index, which implies the biggest firms will make up the biggest quantity of the index, whereas the Dow is price-weighted, which implies the businesses with the best share costs may have the biggest weight within the index.
Backside line
The Dow tracks the inventory efficiency of 30 blue-chip, American firms. The index is price-weighted and dates again to 1896, making it one of many oldest inventory market indexes. It’s not as diversified as broader indexes just like the S&P 500, however it nonetheless gives an image of how the inventory market and huge companies are performing.
