The Dow Jones Industrial Average, better known as the Dow Jones, is the oldest stock market index in existence. Find out more by taking a look at our article.
Thinking about investing in the stock market, more specifically the New York market? We recommend the Dow Jones, or Dow 30 or simply DJ30. Whatever you call it, this long-standing index stock continues to appeal to both novice and experienced traders. This guide focuses on the current prices, indexes and benefits of the DJ30. Keep reading for more information!
Whether you’re a beginner or an advanced trader, investing in the DJ30 is relatively easy. All you need is an account on a stock trading platform to get started. There’s plenty of choice!
After a few checks, the trading platform will approve your account and all you’ll have to do is deposit your funds to start trading on the DJ30. Simply search for your stock on your trading site and start setting up your investment account before investing.
DJ30 stands for Dow Jones Industrial Average. The index has existed for over 100 years. It was in 1896 that it first appeared on the New York Stock Exchange, at the initiative of Charles Henry Dow and Edwards Jones (hence its name). At the time, the index was owned by two companies, the CME Group and Dow Jones and Company.
Since then, the Dow Jones Industrial Average has been in competition with other equally significant indexes, such as the Nasdaq Composite or the Standard & Poor's 500, also known by its abbreviation SP 500.
It has been compared to the CAC 40 in France and it's not just because of the name. DJ30 is indeed one of the most important performance indexes in the United States and is directly associated with the economy of the country. This is proven by its fall in times of crisis and its rise when the NYSE market is booming.
It has been said that the DJ30 is a performance index. But it works differently from those available on the market and is not based solely on the shares of a particular company.
The DJ30 works on a capitalisation basis, meaning it takes into account an average price. This influences the rating of a company on the stock market.
The DJ30 rating will therefore take into account special dividends, company mergers or splits that may impact the value of the shares. The days when only the number of shares and companies were used to calculate the value are long gone. Experts refer to the "Dow divisor" to calculate the index on a daily basis, information you can find in the Wall Street Journal.
Currently, the DJ30 index has 30 companies after 60 changes over its lifespan. This number is of course subject to change. The Wall Street Journal and S&P Dow Jones are responsible for deciding which companies are included.
As mentioned above, it has been more than a century since the DJ30 first appeared on the American stock market. Today, it is still one of the most important stocks.
In 1884, the adventure began under the initiative of Charles Dow and Edward Jones with DJTA or Dow Jones Transportation Average. For a long time, the group was made up of 11 companies that invested in various fields, such as rail, telegraphy, and steam navigation among others.
To facilitate the group's investments, Charles Dow began to think about an index average that it could use.
12 years later, the company diversified. In 1896, the DJIA, or Dow Jones Industrial Average, the most widely quoted performance index in the United States, was created with 12 companies, all of which invested in the industrial sector.
From the very beginning, this index attracted attention with a quotation at 40.94 points and a change of 468%, or 381.7 points in only 8 years between 1919 and 1921. Then, a few years later after DJIA, the Dow Jones Utility Average, which was mainly used in the energy field, was founded.
The switch to the DJ30 did not happen overnight. In 1916 that number of companies reached 20. In 1928, the 30 companies that make up the group were brought together.
In the past, investments tended to focus on the production of useful items for everyday life such as sugar, gas and tobacco. Nowadays, the focus is more on high-tech products, medical and health processing, games and leisure, etc.
Note that the term “DJ30” has remained in use since 1928, because the number of companies that make up the group has not changed. However, several new companies have been integrated over the years, taking the place of other companies that are no longer part of it. Only General Electric remained from the founding of the DJ30 until 2018, or 110 years. Three years later, it was replaced by Walgreens Boots Alliance.
In 1932, the group replaced 8 companies in one go. In 1999, two companies that were listed on Nasdaq, Intel and Microsoft, also joined the group. These are the most important changes to the DJ30 since its founding.
Like any performance index, the DJ30 goes through downturns. Two major declines can be noted: 1932, when the index fell to 41.22 points after having reached 381.7 points in 1929, and 1987 when the DJ30 experienced a 20% drop in value.
It wasn't until 2007 that the index got back on track with 14,198.10 points. The highest point the DJ30 index has ever reached was 34,000 points in June 2020.
Of course, the DJ30 did not escape the 2008 crisis unharmed, losing 50%, or 777.68 points, in just 17 months. It took four years to recover.
In 2001, there was also a spectacular decline in which the Dow Jones lost more than 1000 points in only 9 months.
The current market
Some companies started recovering from the end of August 2020. Let's take a look at the current capitalization of the top 20 most quoted companies in DJ30:
The list includes 3M, one of the oldest members of the group. Also included are American Express, AMGEN, Apple, Boeing, Caterpillar, Cisco Systems, Coca-Cola, Chevron, Dow INC, Goldman Sachs Group, HoneyWell International, International Business Machines, Intel, Johnson & Johnson, JPMorgan Chase & CO, McDonald's and Merck & CO.
The capitalizations of these companies range from $36,000 million to $2,019,800 million. The most recent company to join the group was AMGEN in 2020 alongside Honeywell International.
Before investing in the DJ30 index, you need to know more about its price, which can fluctuate depending on several factors.
Since 2020, one thing is for sure: the DJ30 is higher than ever! This is the biggest recovery the index has ever seen since its inception. It was able to reach 29,551.42 points.
Since this exceptional close, the Dow Jones share price has continued to waver. It sometimes rises following a reassuring speech from President Donald Trump. Likewise, the Federal Reserve lowering its interest rate, Covid19 is worrying traders, or variations in oil prices, can cause it to drop.
On March 9, 2020, the index experienced its most impressive drop just minutes after the market opened. It lost 2,000 points that day with a drop of 7.79%. This lasted for a few days. On March 12, 2020, there was another drop of 2,353.60 points and another of 2,997 points on March 16. An exceptional downtrend that surprised many, given that the Dow Jones is one of the most stable and highest indexes on the US stock market.
The reason for the drop is simply the relationship that the DJ30 index has with the U.S. economy, according to experts.
The political and economic crises and various natural disasters that the country may have experienced during this period play a large role in the evolution of its economy and therefore of the index.
The increase in the number of people out of work, inflation, GDP growth rate and, as mentioned above, the Federal Reserve's rate cut did not spare the stock market, especially the Dow Jones index.
Finally, there is the evolution of the average price per share on the market. DJ30 does not actually work per stock, but on an average. This makes it more vulnerable to large swings.
Rather than investing blindly, it’s important to follow the trend of the index before putting money in it to ensure the success of your investment project. The question is therefore, how do you follow the Dow Jones index?
The easiest way is to get information directly from trading platforms. Like online financial and stock market magazines, these platforms update their DJ30 index prices in real time.
A few online searches will also keep you informed. Google is your best ally in this regard. Type in "Dow Jones price", and you’ll get results in a few seconds.
According to the experts, yes! After spending the end of 2020 swinging back and forth, the market should have recovered by 5% at the beginning of the year to stabilize at 2.7% and 1% during February and March.
Be careful though, depending on the results of the elections and the evolution of the current global health crisis, a new fall may occur. It’s important to be cautious when investing in the stock market in general, but especially when it comes to the DJ30.
In addition to being one of the oldest indexes on the US stock market, the Dow Jones has several advantages.
With the number of stocks that this index can offer you, it will be easy to manage your stock portfolio. This is ideal for novice traders, as you can change your position more quickly and easily.
With the wide fluctuation of this index, you will have a better chance of making money by following the DJ30 than by relying on other investment portfolios. Sure, it can go down, but it can also go up exponentially, and very quickly. This will increase your chances of successful investing.
DJ30 is an easily accessible index for both large investors and novice traders. You can simply read about its price online.
For amateurs and novices to trading, here are some tips to help you successfully invest in the DJ30 index.
Your profile will determine the right strategy to adopt while managing your portfolio. If you don't want to stay on the DJ30 forever, then scalping or day trading is the way to go. If not, swing trading is the way to go.
For beginners, we recommend brokers who offer simulators. This allows you to minimize the risks of your investment. In addition, you can test several strategies to finally find the one you use the best.
Before taking a position on a stock, take a look at the daily forecasts or weekly estimates of the Dow Jones index. This will allow you to better evaluate your shares and the market's evolution.
As you know, DJ30 is directly impacted by market trends and the US economy. So take the time to check out the trends.
Finally, pay careful attention to both economic and business news.
Taking a training course is also essential for traders who wish to benefit from proven strategies and draw inspiration from market ideas.
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