The Dow-Jones Index, as well as the "Black Monday", is known to even those nowhere near stock trading and shares. The Dow Jones Industrial Average appeared in 1884, and was first published in 1896. It was Charles Dow, the editor of the Wall Street Journal, who came up with this idea. To the moment of its first appearance, the Index included 13 companies, with only 2 being of the industrial sector. Since then, the Index has been constantly changing, and from the railroad industry success criteria indicator has developed into one of the key exponents of American industry and economy.
Simplistically on what the Dow-Jones Index Is and What Is It Measured It in
In fact, it is an index number that reflects the standing in a certain economy sector. Originally is was used in the railroad industry, but gradually it spread on the industrial sector too. While working the index out, Charles Dow took 13 companies’ share price, summarized those, and then divided the sum by 13, having obtained the average. Nowadays, experts are geared to 30 largest American companies in the industrial sector.
As can be seen from the above, the Dow-Jones Index is the direct average of the prices of major US industrial enterprises. Hence, it allows the investor to evaluate the standing of the American economy. Leastwise, in its real sector.
Of course, it is not as simple as it seems: there are fudge factors, shares get ‘split up’ to be adjusted to a certain inside quote, and the divisor is far over 30.
Dow-Jones Index Dynamics
In 100 years the Dow-Jones Index has increased in 500 times. Its first value, recorded in 1896, was 40.94. In other words, the average price for a share was $ 40.94. The index was growing gradually: only by 1972 the index exceeded 1,000 lines, as the average share price of an American industrial company reached $ 1000. In those years it was regarded as a crest value. But it was a miss guess: as of 1999, the index passed a milestone of 10,000 lines.
However, there is no use in plotting a chart of the Dow-Jones Index for the next10 years in the hope of constant and isogonic increase. The value is not constantly in a growth phase, there are also sags. That is what happened, for example, on the 1987 ‘Black Monday’, when the index lost more than a fifth of its value (22.6%). No objective reasons for the "Black Monday" have been found: the economy was on the rise, and the relating to news appeared to be even.
How to Earn Money on Dow-Jones Index Monitoring?
Whether you invest in stocks or use more sophisticated derivative instruments, this index may still be useful to you. It is most critical to those who invest in:
• shares of US industrial companies;
• ETF assets set up index-based.
Those who invested in US stocks should not feel entirely at ease, everything in the global economy is interconnected, and a significant change in the Dow-Jones Index can affect world’s money-market as well as the stock market.