Dow = 101

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Dow 101

Five Little-Known = Facts About=20 the Dow Jones Industrials Average

by Tasha Vincent

RELATED = LINKS

Dow=20 Milestones

Stock=20 Market Goes = Decimal

The Index is not Truly=20 Industrial

Though its name would lead you to believe = it is=20 composed of only industrial companies, in fact the DJIA = contains=20 stocks across many "industries," not all of which are = "industrial."=20

The industries represented include financial, food,=20 technology, retail, heavy equipment, oil, chemical, = pharmaceutical,=20 consumer goods, and entertainment. Dow Jones also collects = and=20 reports data for two other sectors of the economy in its=20 Transportation and Utilities indices.

The DJIA Represents Only 30 = Stocks

To be chosen for inclusion in the index, = a stock=20 must be a leader in its industry and must be widely held by = both=20 individual and institutional investors (i.e., pension plans, = mutual=20 funds, etc.). Together, the 30 stocks in the average = represent about=20 20% of the market value of all U.S. stocks, so although the = DJIA is=20 not the whole stock market, it is certainly representative = of the=20 stock market as a whole.

The DJIA is not really an = "Average"

A simple average is calculated by adding = up a value=20 for a number of items, then dividing by the number of items. = The Dow=20 reflects the value of stock prices, but a simple average = cannot=20 accurately reflect the value of stock prices.

Here's = why.=20 When stocks become pricey, companies routinely announce = stock splits=20 to make their stocks more appealing to individual investors. =

For example, a company may have 100 shares = outstanding=20 priced at $100 per share, for a market value of $10,000. If = the firm=20 announces a 2-for-1 split, the price is cut in half, and the = number=20 of shares is doubled, so there would be 200 shares = outstanding,=20 priced at $50 per share. The market value is still $10,000, = but the=20 price point is now more attractive to smaller investors. =

To=20 take into account the changes in price associated with stock = splits,=20 the Dow Jones Industrial "Average" is adjusted to account = for any=20 stock splits in each of the included companies. Here is a = table of=20 recent=20 milestones in the average.

The Following 30 Companies Currently = Comprise=20 the Dow Industrials (as of 3/31/06):

3M=20
AIG=20
Alcoa=20
Altria=20
American Express=20
AT&T=20
Boeing=20
Caterpillar=20
Citigroup=20
Coca-Cola=20
DuPont=20
ExxonMobil=20
General Electric=20
General Motors=20
Hewlett-Packard=20
Home Depot=20
Honeywell International=20
Intel=20
International Business Machines=20
JPMorgan Chase=20
Johnson & Johnson=20
McDonald's=20
Merck=20
Microsoft=20
Pfizer=20
Procter & Gamble=20
United Technologies=20
Wal-Mart=20
Walt Disney

Who is Dow Jones?

Charles = Dow=20 and Edward Jones are two-thirds of the team that founded Dow = Jones=20 & Company in 1882. Charles Bergstresser was the "& = Company,"=20 but by 1889 he was joined by 47 others as the company grew. = They=20 specialized in newsletters (the precursor to The Wall = Street=20 Journal) focusing on financial news. When Dow died in = 1902, Clarence=20 Barron, originally hired as a correspondent, purchased a = controlling interest in the firm.

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Did you know?=20: Benjamin=20 Harrison, the 23rd president of the United States, was the = grandson of William Henry Harrison, the 9th president of = the=20 United States.

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