The stock market can be a place to make the fortune of a lifetime. It can also serve as a great alternative to a savings account if your portfolio is strong.
Your stock portfolio performance will be more impressive if (surprise) you have knowledge of and understand how stocks work.
But, many people get lost in the jargon that comes with investing. What is day trading? What does trading options mean? What does Dow Jones mean?
Luckily, it’s simple to learn all you need in order to make investing a real option.
Not sure where to start? Don’t worry, we got you covered.
Let’s take a look at everything you need to know about Dow Jones.
So, What Is It?
When people talk about Dow Jones, they’re really referring to something known as the Dow Jones Industrial Average (DJIA). This refers to a stock market index composes of 30 different public companies from all corners of the market.
The original stock grouping was created over 100 years ago. Today, it serves as the heartbeat of the entire stock market due to the high-level stocks the index is made of.
A few of these companies are:
- Walmart (WMT)
- Disney (DIS)
- Boeing (BA)
- Goldman Sachs (GS)
- Coca-Cola (KO)
You can check out this article to learn more about the Dow Jones today and what stocks are in its index.
What Does It Do for the Market?
In a sense, the DJIA is the market.
Whenever you see news articles or reports about how “the market” did today, last week, or throughout the last year, they’re referring to the DJIA.
Since it’s made up of a diverse range of stocks that all carry far more weight than regular stocks do, how the DJIA performs is more or less how the entire market is doing.
For example, if one Dow Jones stock plummets in two days, the market isn’t going to see too much of an issue. However, if every DJIA stock takes a hit throughout the week, the “market” itself will be on a decline.
How Is Its Value Calculated?
As previously mentioned, Dow stocks carry a heavier weight than normal stocks because of their value. But, stocks in the index with higher share prices carry more weight than those with lower share prices.
To calculate the value of the index, all 30 stocks are added up and then divided by a number known as the Dow Divisor. The Dow Divisor can change in value based off a large group of events that may occur in the market.
Then, the final number is the value of the DJIA. That’s how the entire market is given a numerical score.
Understanding What Does Dow Jones Mean Can Seem Difficult
But it doesn’t have to be.
With the above information about what does Dow Jones mean in mind, you’ll be well on your way to taking your first step toward investing.
Want to learn more about more money tips that can help make your life easier? This article has plenty of useful information.