Successful Investors Understand the Importance of the DJIA Chart. Read This to Find Out Why
If you ever hear an investor saying, the market has gone up or down; chances are they are referring to Dow Jones Industrial Average. The second oldest active stock market index in the USA, DJIA is now one of the most preferred indexes for changes in the stock market. Created by Charles Down in 1885, this chart was made with the objective to denote how impactful are the companies for the US economy.
The original Dow stocks include:
- American Cotton Oil
- American Tobacco
- General Electric
- American Sugar
- U.S. Rubber
- Chicago Gas
- National Lead
- Laclede Gas
- Tennessee Coal and Iron
- U.S. Leather
- Distilling & Cattle Feeding
- North American
Now DJIA has a total of 30 major companies that make up Dow Jones Industrial Average. It is also referred to as the economic barometer of the world and is one of the most followed stock market indicator at national; as well as global scale. It measures the strength or weakness of the entire US stock market.
When the investment was made through bonds, DJIA helped stock investors by being the only U.S. market measure that investors could watch on a daily and even intraday basis, for more than several decades. Despite the inceptions of various other stock indexes, DJIA holds a significance for the investors.
Yes, you will find plenty of investors standing firm to the argument that Dow shows limited stock and is irrelevant, but no one can deny the fact that has helped investors keep a tab on the companies that have been influencing nation’s economy to a vast extent. DJIA creators aimed at tracking the shock of massive companies and then narrowed down their tracking to only large industrial companies that drive US economic growth. These companies are inclusive of all industries except the utilities and transportation, thereby giving a broader perspective of the economy.
All the 30 companies tracked by DJIA reflect the direction in which the market moves. It is the benchmark, tracking stocks that are the leaders of the economy. Compared to other stock, even its sibling, DJIA is less volatile and the Dow move in the same direction as the other indexes.
Unlike other stock indexes, DJIA has a significantly high median market cap, because of all the supersize companies.
Successful investors understand the importance of keeping an eye on historical as well as the latest trends. Trend analysis is a crucial technical analysis aspect that helps in predicting future prices. No one stock index can compare with the longevity of the DJIA charts.
Despite all the criticism of DJIA not being technically advanced and a showcase of limited market growth, it is still one of the most recognized and preferred stock market indexes that serves a valuable purpose and is still one of the most looked upon stock index by successful investors, who realize the importance of DJIA chart. Since reading and understanding DJIA can get tricky owing to its essential technicality, seek the help of investment research companies like Securities Research Company provides six DJIA Chart eBooks and several Wall and Handout Charts with accurate DJIA historical information dating back to more than 100 years.