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We see the ticker at the bottom of almost every early morning news program. It is as if the importance of the Dow Jones Industrial Average would somehow provide you with the information you might need to get through the day. Does the DJIA still have relevance?
Not really unless you query the Dow Jones company. In a straightforward introduction, which by the way is where most financial educators begin their intro to investing discussions, they describe the important of this index of the 30 companies as "Roughly two-thirds of the DJIA's 30 component companies are manufacturers of industrial and consumer goods. The others represent industries as diverse as financial services, entertainment and information technology. Even so, the DJIA today serves the same purpose for which it was created - to provide a clear, straightforward view of the stock market and, by extension, the U.S. economy."
Clear to whom? While the Dow companies may touch your life in many ways, they often don't seem to be something you'd want to invest in - at least not as a group. There was time when the Dow had nay twelve stocks and the investment world was much smaller. By 1928, the index had grown to 30 companies and investors who were not inside the original small cliques the formed the index, were introduced to the stock market in a new way and soon, they found out that there was also volatility in the stock market.
The DJIA does not contain the largest companies by market cap (the sum of outstanding shares and the worth of those shares). But it does contain is one of many snapshots of the economy and perhaps the global one as well. many are multinational, meaning they have interests in other countries. They remain based in the US, but with arms across the world, both in how they produce their products or services and in customer reach, they might be consider international equities - businesses without borders.
Below you will find a list of those 30 companies as of 2012.
As part of our continuing educational series about the world of finance, the following discussion is focused your money. On this episode of the Financial Impact Factor Radio with Paul Petillo, Dave Kittredge and Dave Ng, we discuss the relevance of the Dow Jones Industrial Average. And here we are, in the midst of a sluggish recovery in the US economy, a global economy hinged on a variety of issues that when the Dow was first created, didn‚Äôt matter and the Dow is closing in on that all-time high ‚Äì it recently closed at 12,800 and change.
Listen as your hosts discuss what has become the standard bearer of our economic health - even if it really isn't.