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I’m sure you’ve heard of the Dow Jones Industrial Average (DJIA), or simply “the Dow”. It’s reported on the news every evening. The Dow was up or down today. What does that really mean? Sure, you know that it has something to do with the Stock Market, but beyond that you’re unclear, right? Don’t be discouraged. Most Americans couldn’t tell you much about the DJIA. The Dow Jones Industrial average is one of the oldest surviving and oft quoted stock market indices in the world. It was started in 1896 by Charles Dow. When it was started it tracked 12 stocks. Today it represents 30 stocks. Despite being used as a gauge of stock market performance by many I think there are a couple problems with the Dow. The first is that it is tiny. People often assume that the Dow represents the overall movements of the entire stock market. But it only represents the movements of 30 stocks. Compared to the over 4,000 actively traded stocks in the U.S. markets, the Dow is a gauge of very little indeed. Another problem with the DJIA is that it is a price-weighted index. That means that the index gives a larger weight to the underlying stock components with the higher stock prices. It does not assign weight to is components by how much of their industry they comprise or the market capitalization of the individual corporations, the way other more useful indices do. So the next time you hear about the Dow being up or down, don’t assume that the entire market is following suit. This tiny little index is an outdated gauge of 30 individual stocks. If you really want a broader picture of how the overall U.S. market is doing, I suggest looking at a better, more inclusive index like the Russell 3000 or the Wilshire 5000.

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9y ago
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11y ago

At the moment the Dow Jones Industrial Average ranges around 12,000 which is a high increase from its almost nonresistant average in 1900s.

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Q: What is the Dow Jones Industrial Average at this moment in time?
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