What is the Dow Jones Index and what does it do?
The Dow Jones Industrial Average is an industry average of the US stock index, abbreviated DJI, and shows price fluctuations of 30 companies operating in the United States.
This index was founded by Charles Dow almost a century ago, and that is exactly why investors use this index to compare their performance in the stock market.
What companies does Dow Jones consist of?
Shares of well-known American brands operating in finance, oil and gas, public services, consumer goods, technology and telecommunications, and skin care form a weighted price index.
This means that the shares of higher value companies will have a greater impact on market value, and similarly, lower value shares will have less value on market value. In other words, a stock with a higher value and volume constitutes 70% of the market value.
It is worth noting that the stocks of companies such as Amazon, Facebook and Alphabet are not included in this index due to the high weight of their revenue streams.
Dow Jones Index Applications
It is a factor for monitoring market conditions. Because this index, as one of the main indicators, creates a correct understanding of the stock market for investors.
Reduces investment risk. In fact, by buying this index, you can experience a diverse and low-risk investment.
It is a factor in monitoring the performance of the investment. For example, if the profit from your portfolio is consistently higher than Dow Jones, it indicates that you have made the optimal investment, and vice versa.
The future trend of stocks determines mutual funds and ETFs. In fact, given the beta, it can be measured that the market value of a company's stock against Dow Jones will increase or decrease.