Dow Jones Industrial Average or DJIA as it is popularly known has its origin from the Dow Jones & Company. Dow Jones & Company was into publishing (product example-Wall Street Journal) especially dealing in finance related news and information. Dow Jones & Company was formed in the year 1882 by three friends including Charles Dow & Edward Jones, after whom the Company was named. Dow Jones & Company is currently successfully acquired by News Corporation. One of the business lines of the company is related to calculating market indices. One popular market index of the Company is the Dow Jones Industrial Average, which is simply known as ‘The Dow’. In this article we will hence explain more about the Dow:

As known to all investors, the Dow along with NASDAQ composite, S&P 500 & Russell 2000 control the world economy. Dow Jones Industrial Average is hence one of the most closely followed benchmark indices.

So what is DJIA? Dow Jones Industrial Average is simply the weighted average of 30 best stocks of NYSE and the NASDAQ. These 30 best stocks are all part of blue chip companies. DJIA is calculated by adding the sum of all the 30 stocks and then dividing it by the divisor. The divisor is used to nullify the effect of stock splits and stock dividends and hence changes whenever such an event occurs in these 30 stocks. The divisor gives the index a consistent value. Derivatives of the Dow Jones trade on the Chicago Board Options Exchange.

It is not that the 30 stocks in the Dow Jones Industrial Average are permanent ones. The original DJIA had only 12 such best stocks. As the market and time changes, little less performing companies are replaced by better performing companies. This also means that a company which has been pushed out from the index can rejoin it when circumstances changes for good. For example one of the most popular blue chip company General Electrics was removed from the index once and currently is again a part of the index.

As an investor one can invest in the Dow Jones Industrial Average by investing in exchange traded funds. Or if interested in derivatives then through futures & options contract. As of now the best day in the history of DJIA was on September 13^th 2008 when it closed with 9387.61 points through some remarkable percentage change.

Some of the leading stocks of DJIA come from: GE, HP, ExxonMobil, Coca Cola, Cisco, Intel, McDonalds, IBM, Microsoft, Wal Mart & Walt Disney etc.