Whether you're new to investing or have been investing for years, you're likely somewhat familiar with the DJIA or the Dow Jones Industrial Average. The DJIA is also sometimes referred to simply as the Dow or Dow Jones.
The "average" in DJIA indicates that it is a stock market index. A stock market index is a tool used by investors to better understand the performance of either a section of the overall market or the market in general. A stock market index is made up of chosen stocks that can give investors an idea about performance of stocks overall.
Though investors are very familiar with the DJIA today as it's made a strong name for itself over the years, this hasn't always been the case.
Dow Jones Index Throughout History
The DJIA today isn't the same as it was in the beginning. The Dow Jones Industrial Average was first calculated on May 26, 1896. The DJIA was actually the second stock index to be created, though it is the better known today. The Dow Jones Transportation was first published in 1885.
Though the title "industrial" remains in the DJIA today, there's very little about the index that's industrial. Originally, the 30 companies that were featured on the index were all involved in industrial business. Today, that's not the case.
The initial components or companies that were indexed on the DJIA included:
- American Cotton Oil Company
- American Sugar Company
- American Tobacco Company
- Chicago Gas Company
- Distilling & Cattle Feeding Company
- General Electric
- Laclede Gas Company
- National Lead Company
- North American Company
- Tennessee Coal, Iron and Railroad Company
- S. Leather Company
- United States Rubber Company
Though many of those names might not be familiar to today's investors, the DJIA was actually a good predictor for business success. General Electric remained on the DJIA until 2018.
Some of the names listed above aren't familiar because companies went through mergers and name changes. For example, the American Cotton Oil Company is now a part of Unilever. The American Sugar Company became Domino Foods Inc. And, the United State Rubber Company merged with B.F. Goodrich, which is now owned by Michelin.
Now that you understand more about the history of the Dow Jones, let's look at the DJIA today.
Dow Jones Index Today
The DJIA today is still made up of 30 companies, which are used as a baseline for the success of the United States economy.
The components or companies that are included in the DJIA today are:
- American Express
- Cisco Systems
- Dow DuPont
- The Home Depot
- Johnson & Johnson
- JPMorgan Chase
- Merck & Company
- Procter & Gamble
- UnitedHealth Group
- United Technologies
- Walgreens Boots Alliance
- Walt Disney
As you can see, the Dow today is made up of many successful companies, many of which have been listed on the index for a long time. The company that remained on the DJIA the longest was General Electric, which was listed for 111 years.
The DJIA today is affected by not only the success and performance of the listed companies, but also by economic reports, domestic and foreign political events, and natural disasters.
DJIA Today And The Future
The Dow Jones index today remains a strong predictor for many investors who are seeking to better understand the market and figure out what it will do next. Over time, the DJIA has gone up. Since its inception, it has gained over 50,000%. That's a lot, even over that amount of time.
Though the DJIA today fluctuates with political and economic uncertainty, the general trend is up. When you're looking for long term investments, this is a great place to look for an understanding of the market.