Dow Jones: The 30 largest significant companies in the U.S.

The Dow Jones Industrial Average (DJIA) is one of the US’s oldest and most well-known stock market indexes. It is also known as “Dow 30.”

What is the Dow Jones Industrial Average?

Dow Jones (DJIA): The 30 biggest American publicly traded companies make up the Dow Jones Industrial Average (DJIA). It is a trustworthy indicator of both the overall health of the American stock market and the growth of the country’s economy.

The index is named after Charles Dow, one of the founders of The Wall Street Journal. On July 8, 1889, it released its first newspaper, which featured “economic indicators, corporate news, and international happenings.”

In 1896, the “Dow Jones Industrial Average” was formally introduced. It was the first index of stocks and bonds on the New York Stock Exchange.

How to calculate the value of the Dow 30

Instead of using the market capitalization approach as stock indices do, Dow Jones exclusively uses the price-weighted methodology. Adding up the prices of each of the stocks in the index and then dividing by a factor gives the value of Dow Jones.

The factor typically stays around 0.15. It changes if any company in the Dow Jones has a stock split. Because of this, a stock split in any Dow Jones company won’t affect the index’s movement.

What is the difference between Dow Jones & S&P 500

The Dow Jones Industrial Average (DJIA) and the Standard & Poor’s 500 (S&P 500) are two of the most well-known stock market indices in the U.S. These include the stocks of large, publicly traded companies. Both indices serve as gauges of the overall health of the American stock market.

However, there are some key differences between the two indices.

Index calculation: A price-weighted approach is a basis for calculating the index value of Dow Jones. On the other hand, the S&P 500 follows only market capitalization methodology while calculating the value of the index.

Index Constituents: The Dow Jones Industrial Average only includes 30 prominent large-cap American companies. The S&P 500, however, represents an overall view of the American stock market. We see 500 significant companies in the S&P 500 that are part of American stock exchanges.

The S&P 500 can provide a more comprehensive picture of the American economy than the Dow Jones Industrial Average.

People think the Dow Jones shows how famous American companies are doing. However, the S&P 500 is better for seeing how the U.S. stock market performs.

Difference between Dow Jones & Nasdaq Composite

Index calculation: The primary technique for determining the value of the Dow Jones index is price-weighted analysis. The Nasdaq Composite, on the other hand, only determines the value of the index using the market capitalization method.

Index Constituents: Only 30 prominent large-cap American companies with public listings on the Nasdaq and New York Stock Exchange make up the Dow Jones Industrial Average. The Nasdaq Composite, on the other hand, includes more than 3,000 Nasdaq-listed securities.

If we take the sector into account, only technology stocks make up 50% of the Nasdaq Composite index. However, we may observe a balanced weighting of the majors representing several important U.S. industries in the Dow Jones.

Stocks with an outstanding reputation, consistent growth, and high investor interest are part of the Dow Jones index. However, if we look at the Nasdaq Composite, it has assets like common stocks, ordinary shares, and standard counterparts like ADRs.

Sectors of the Dow 30

The Dow Jones Industrial Average represents the main American economic sectors that fuel the nation’s economic expansion and success.

The sectors which are part of the Dow Jones are as follows:

• General Industrials
• Technology Hardware & Equipment
• Aerospace & Defense
• Chemicals
• Oil & Gas Producers
• Pharmaceuticals & Biotechnology
• Food and Drug Retailers
• Software & Computer Services
• Electronic & Electrical Equipment
• Leisure Goods
• Household Goods
• Financial Services
• Health Care Equipment & Services
• Telecomms

Stocks of the Dow Jones Industrial Average

The firms in the Dow Jones are top players with high market value and profitability. Most are industry leaders.

The table below includes a list of these 30 prominent Dow Jones components.

Conclusion

The main objective of all indexes, regardless of variances between the Dow Jones, S&P 500, and Nasdaq Composite, is to offer the finest platform for investment. The companies in these indices come from various industries and regions, representing the American economy.

The indices represent outstanding technological achievements and innovation in addition to the nation’s economic growth. To understand the American economy thoroughly, we should also give equal importance to the Dow 30, S&P 500, and Nasdaq Composite indices.