Dow Jones Industrial Average (DJIA): A Beginner's Guide

The Dow Jones Industrial Average is a financial index that you will need to be aware of if you are planning on investing in the stock market. Here are the basics of the Dow Jones industrial average and how it works.

Dow Jones Industrial Average

The Dow Jones Industrial Average was created by a man named Charles Dow. He created the average as a way to gauge the performance of 30 of the top industrial companies in the industry. In today's market, the name industrial does not necessarily have any significance as most of the companies in the index are not industrial by nature. However, the index does include 30 of the largest and most powerful companies in the economy today. For example, you will find names like Wal-Mart, Walt Disney Co., AT&T, 3M, HP, and The Home Depot.

Significance

This financial index is significant because it gives a good indication of what the overall stock market and economy are doing. These companies represent a large sample of the economy as a whole. Therefore, if these companies are doing well, the rest of the economy and stock market are typically doing well also. Many investors use this as a tool to gauge how the market as a whole is moving.