 |
 |
|
You are here: Stocks Investing Guide >
Stock Indexes > The Dow Jones Industrial Average |
|
|
A Stock Market Index: The Dow Jones Industrial
Average
|
Anyone who used to watch
the 6 'o clock News with Dad has heard of the Dow
Jones, but it's doubtful that most people have
even a vague idea of what it actually is. For
general purposes, the Dow Jones Industrial Average
is a number that gives the world a snapshot of how
well the stock market does on any particular day.
Higher numbers are better: when the Dow dropped,
Dad rattled his newspaper and muttered something
about the country going to hell in a handcart.
When the Dow was up, things were looking good, and
Dad switched on the football game with the
satisfied air of a man whose investments may see
him
|
|
through to retirement
after all. To players as well as the average Joe, the
Dow gives hints on timing. For people who use a
strategy, trading when the Dow is low may mean they get
better prices. Forecasting dips and rises in the Dow is
something for specialists, though: for most people, the
stock market index is just like the weather; something
you can comment on but do nothing about.
If you've seen old movies with a stock ticker rattling
in the room, you've probably wondered what it actually
does. The old fashioned machine was a way for
high-powered investors to keep track of the stock market
the way people do now by going online. The ticker symbol
or each corporation is listed, followed by the latest
share price. Traders in the past used the ticker symbols
to guide them in deciding when to buy or sell stocks.
Of course, these days, as many Moms as Dads are watching
the markets, and women make smart investors, being
logical about money and quick to find ways to save and
increase the fortunes of themselves and their families.
Still, how the Dow is arrived at and what makes it worth
watching is a question many people don't like to ask,
being unaware that nobody else learned about stock
market indices in high school either.
So, let's clear up any confusion and get to the facts.
The Dow Jones, while being the most frequently reported
stock market index in the U.S., is one of several.
(Other countries have their own markets and their own
market indicators, since stock trading is of
international importance). The three major indices
include the Dow, the NASDAQ composite and Standard &
Poor's 500. Taken all together, the three indices make
up the Security Market Indicator Series (SMIS). The
reason there are three indices rather than one is that
they are each based on different calculations and
different corporations that make up important sectors of
the overall market. While the Dow follows a total of 30
major corporations listed on the NYSE, the NASDAQ
composite is made up of companies that aren't big enough
financially to be listed on the NYSE. All together, the
stock market indices take into account financial
dealings of the most important corporations in the
country.
The S&P 500 is made up of the 500 "biggest" (healthiest,
most profitable and large-cap) corporations in the
country, and as various corporations move up and down in
financial health, membership in the S&P 500 changes to
reflect those moves. The S&P 500 companies make up about
80% of the total value of the stock market, and
corporations may be listed on the NYSE (the majority),
and to a lesser extent, on the AMEX and the NASDAQ.
The Dow Jones Industrial Average is calculated using the
financial data of 30 major companies; big, strong ones.
General Motors, Wal-Mart, Hewlett-Packard, Disney and
McDonalds are just a few of the big names current on the
Dow list. But, how is the decision to use some companies
over others reached?
|
|
|
 |
 |
How to stick to a household budget
and have extra
money for investing
1. Customize your budget with your current needs, wants and future goals in mind.
2. Try to think if your budgeting plan as a "spending" plan rather than penny pitching.
3. Sit down and rationally discuss budget goals and spending limits with your spouse. You are bound to disagree somethere, but it important to take the time to find common ground.
|
|
 |
|
 |
|
Stocks & Investing Advice
|
|
|
|
|
|
|
