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Financial Advisor Gaithersburg MD: What is Dow Jones Industrial Average?

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What is Dow Jones Industrial Average?

Our financial advisors can lead you in the right direction for investing in your future today! First, what is the Dow Jones Industrial Average? The Dow Jones Industrial Average (DJIA) is a stock market index calculated by the movement of a collection of 30 stocks. The purpose of this index is to act as an indicator for the performance of the industrial sector within the American economy. It is the second oldest US Market index, and one of the most commonly tracked.

Companies Involved

Interestingly, though the stocks included in the Dow Jones Industrial Average are meant to track the industrial sector, many of the companies included are not, themselves, industrial companies. However, they are all companies which are related to the industrial sector, which S&P Dow Jones Indices (the company which compiles the index) has determined are related to the periodic growth and slowdown of industry in the United States. If this sounds complicated, fear not; our financial advisors can help you to understand how this can affect your portfolio.

Difference in Investments

It is important to note here the difference between investing directly into the DJIA – which can’t be done – and investing in the companies that it tracks. The investments that track the DJIA are not owned or sold by S&P Dow Jones Indices. They simply identify the companies included in the index, and purchase shares of them. The DJIA is just one of several indices that professionals use to track the market. If you need more information about the Dow Jones Industrial Average contact CIC Wealth today; our financial advisors are here to help.

An exchange-traded fund (ETF) is similar to a mutual fund that tracks a specific stock or bond index, such as the Barclays Capital 1–3 Year Treasury Index. ETFs trade on one of the major stock markets and can be bought and sold throughout the trading day, like a stock, at the current market price. And, like stock investing, ETF investing involves principal risk—the chance that you won’t get all the money back that you originally invested—market risk, underlying securities risk, and secondary market price.

All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.