The Dow Jones Industrial Average is a market index made up of the 30 most influential stocks on the New York Stock Exchange (NYSE) and the NASDAQ. The index is weighted by price. The Dow 30 was started by Charles Dow in 1896 and began with 12 stocks. The selection of the stocks that make up the Dow is at the discretion of the editors of The Wall Street Journal.
The Dow Jones stocks covers all major sectors of the economy except transportation and utilities. It was originally designed to be a simple average of the stocks making up the index but today is weighted by the price of the stocks in the index.
The DJIA is not considered to be risky or volatile as it contains 30 blue-chip stocks. It has stood the test of time as a predictor of the market and market trends. When you hear a reference to "the market," chances are the reference is to the Dow 30. The DJIA is closely watched every day with the closing price carefully documented.
A disadvantage of the DJIA is that since there are over 10,000 publicly-traded companies in the U.S., an index of 30 stocks doesn't begin to represent them all. Another disadvantage is that many prefer weighting based on market capitalization rather than on price. An index like the Standard and Poor's 500 is weighted based on market capitalization.
The Dow Jones Industrial Average closed at 9,545 today.
