Most people around the world will have heard of the Dow Jones Industrial (DOW). It’s one of the most popular trading markets in the world, a regular readout on news channels everywhere. Despite having heard of the DOW, most people have no idea what it actually is or what it does. Today we’ve gathered 5 key points about the Dow Industrial, so the next time it comes up in front of you, you can drop some of this info and play the expert.
1.There is More Than One DOW
The Dow Jones Industrial Average isn’t the only DOW market out there. In fact, it wasn’t even the first. Charles Dow was a journalist with a strong passion for business & finance. It was as a part of this passion that he originally created the Dow Jones Industrial Average. This was done as part of his research into market movements and how to best analyze, understand and predict overall market behaviour. He also created the Dow Jones Transportation Average, targeting mainly transport companies. This was the original average, followed shortly by the industrial average.
Charles Dow believed that while neither of these averages could be used as a predictor alone, they could be used together as a tool to help predict economic changes. Of course, Dow still believed there was a lot more to it, the averaging technique was just a method of simplification for those with less understanding of economics. His approach was to use a variety of statistics and readings along with his averages to give a reasonable prediction of economic change or activity.
2. The DOW Average is Not the Actual Average of DOW Values
The original intent for the DOW was that it would be used to calculate the average value of the 12 most important companies in the US. The Dow Jones Industrial today has grown to contain 30 companies, more than double the original amount, and there is still talk of adding more.
3. It Has the Potential to Expand
There have been proposals to expand the DOW beyond the current 30 company limit to a bigger amount, with 50 being the most popular number. So far this hasn’t happened because the committee doesn’t believe there’s enough reason to do so, but the DOW has expanded a few times in the past so it isn’t impossible to see that happening again. Besides, with more and more companies in existence and a bigger world in general, more companies could happen sooner rather than later.
4. Only 1 Original Company Remains
There are only one of the original 12 companies remaining on the Dow Industrial. This is General Electric, who was on the original DOW and remain there today. Over a century of success for this company might not hold up though, as their share prices have taken a hammering over recent years.
5. DOW Companies Are Changing Faster Than Ever Before
Companies are always being removed from the DOW or added to it, although the number stays exactly at 30. Some companies have even been on, off, and on again – multiple times in the case of United Technologies/Aircraft. Nowadays these changes come quicker than ever, with more than 10 changes in the past decade – compared to 8 changes from 1940-1981.