There’s Money to be Made in Any Market if you Understand the Dow Jones Stock Chart
There has been a substantial increase in the ways of investment and even people, with some extra money, are blindfoldedly investing in stocks. The world of shares and stock exchange is less complicated than you think. And after all, why test your luck when you have numbers to bestow your faith in. People have been investing without researching about the company and are losing their life savings over ignorant investments. Investments, if done right, can earn you a lot of money and we have many examples of legends who made a fortune from their investments.
The world of stock exchange has significantly evolved over the years and now, we have various stock market indexes to guide us in our investments. There are various stock market indexes are used to perceive the trend of the stock market and using them we can spot the right time to invest our money. One of the oldest, most discussed and used stock market indexes is – Dow Jones Industrial Average or DJIA. DJIA has been constantly under discussion and use in spite of its criticism. We will cover the criticism part later in this article; for now, let us start with – What is DJIA and How can Dow Jones Stock Chart be used in making intelligent investments?
What is DJIA and how is it calculated?
Dow Jones Industrial Average or DJIA was founded in 1896 by Charles Dow and Edward Jones. The main motive behind DJIA was to develop a proxy for the US economy and if we talk of DJIA in the current time, it is fulfilling its founding objective. DJIA has component companies and the share price of the individual stocks of these companies helps in calculating its final value.
In the beginning, DJIA had 12 component companies mainly from the industrial sector such as – railroads, cotton, gas, etc. At the time of its foundation, DJIA was a weighted arithmetic mean stock market index. This means the final DJIA was the arithmetic mean of the share prices of stocks of these 12 companies. Initially, DJIA was less impactful and many of the factors affecting the economy remained unchecked
DJIA, now, has 30 publicly owned companies as its components and is a price-weighted stock market index. This means, more the share price of a stock of a company, greater is their weightage in the final sum. This final sum is divided by a DOW Divisor and not by the number of contributing companies, as it was done earlier. This DOW Divisor is adjusted in cases of any dividend-splits, or spin-offs, to ensure that the final value of DJIA remains unaffected by these minor events. Securities Research is an Investment Research Company with an extensive collection of data sets of the stock market. Learn from the experts by downloading your free Ebook on Dow Jones Stock Chart now!
Dow Jones Stock Chart and Making Money
DJIA has been a synonym for the US economy for a long time now. Its 30 component companies are major business-leaders like Apple, AT&T, Boeing, Microsoft, etc. Investment Research is an important part of an investment and Dow Jones Stock Chart helps in studying the history of a company you are planning to invest in. This helps you in making informed investments, leaving nothing to chance.
One of the things that has been advised by many of the successful investors is don’t allow your reflexes or emotions get in the way of your investments. You have to completely believe in a company before investing your money in it. If the Dow Jones Stock Chart shows the company has recovered from various falls, and large investors have stayed with it in such situations, this means the company is trustworthy.
DJIA has been under a lot of criticism, mainly because it considers only 30 component companies to estimate the US economy and many consider it partial or unfair. The components of DJIA keeps on changing according to the ongoing strength of various companies and this makes it crisp and more accurate. Despite the criticism DJIA, as of now, is one of the most popular Stock Market Indexes used.
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