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- The Major Differences Between the S&P and the Dow Jones Industrial Average
- The Average Return on the Dow Jones During Its Lifetime
- How to Invest in Dow Jones Select Dividend Index Fund
- How Many Stocks Are in Dow Jones Industrial Average?
- What Does a Dow Jones Point Drop Mean?
The Dow Jones Industrial Average is the oldest and most widely followed U.S. stock market index. A stock index tracks the price changes of a selected group of stocks -- in this case 30 stocks chosen by the Dow Jones Company. Although you cannot buy directly into the index, there are investment products available that match the performance of the DJIA.
Dow 30 Stocks
The DJIA tracks the share price values and change of 30 companies selected to represent the major companies and sectors of the U.S. economy. You will recognize most, if not all, of the 30 Dow Jones Industrial companies. The index components include IBM, McDonald's, The Walt Disney Company, Exxon-Mobil, Coca Cola, Walmart, Bank of America and American Express. The stocks in the index are changed to best match the fortunes of the U.S. economy and overall stock market. For example, in 2009, General Motors was replaced by Cisco Systems after the auto manufacturer declared bankruptcy.
Buy Stock Shares
One way to invest in the DJIA is to buy shares of each of the 30 stocks in the index. The index is share price weighted, so buying an equal number of shares of each stock would produce investment results similar to the DJIA index. At the time of publication, buying one share each of the 30 Dow Jones stocks would cost about $2,000. This might not be an efficient way to buy the index unless you could purchase a number of shares of each stock, since your stockbroker would charge a separate commission for each purchase.
An exchange-traded fund is designed to track the results of a specific index. One ETF, the SPDR Dow Jones Industrial Average ETF (stock symbol DIA), directly tracks the DJIA. This ETF hold shares of the DJIA stocks in the same proportion as tracked by the Industrials stock index. Shares of DIA can be bought through any stock brokerage account and would be the most efficient way to invest in the DJIA. The SPDR DJIA ETF was formerly called the DIAMONDS Trust, Series 1.
Derivative Financial Products
Investors and traders who want to trade against or with changes in the DJIA can choose from a variety of derivative financial products based on the stock index's value. The Chicago Board Options Exchange provides put and call options on the DJIA index and on the DIA ETF. The CME Group offers futures contracts of three different sizes that trade against the value of the DJIA. For investors familiar with options or futures trading, these products can be used to speculate on or hedge against the DJIA value.