The Dow Jones Industrial Average

The Dow Jones Industrial Average (DJIA) is one of the oldest and most well-known indices in the world. Popularly known as the Dow, this index contains 30 large-cap blue chip companies that are some of the biggest and most influential companies based in the US.

The Dow Jones Industrial Average was created by the famous Wall Street Journal editor Charles Dow and named along with his business associate Edward Jones. It was on May 26,1896 that the industrial average was first calculated.

Some of its famous stocks are Microsoft, General Electric, McDonald and Exxon. The selection of the companies to be included in the index falls upon the discretion of the Wall Street Journal editors.

The Dow was initially just a weighted average of stock prices. Over time it has become a price-weighted system where splits, stocks, and spin-offs have caused divisor alterations.

The endurance of the Dow can be attributed to the trust and confidence of traders and investors on the industrial average. Standing the test of time, the Dow has retained its spot among the top indices of the US due to it being significantly less volatile and less risky than the others.

However, the stability provided by the Dow is only as good as the 30 companies in it. With only 30 out of over 10,000 public companies in the US, the Dow provides close to no diversification and is not entirely the greatest indicator of the US economy.

Trading on the Dow is a safe bet for any trader as it has proven time and again that it will endure all kinds of hindrances the market may undergo.