Please Name the 30 stocks in the Dow
There are 30 stocks that make up the Dow Jones Industrial Average in the stock market. Name them.
Well, it’s not fair to discuss investing without first talking about some of the major components of the market. I can’t think of a better place to start than by talking about “The Dow”… or more appropriately, the Dow Jones Industrial Average (referred to as DJIA from here on out).
Many people catch brief glimpses of the Dow during the course of the typical day. Either you hear about it on the way home from work on the radio - “the Dow gained/lost X number of points today” or you see it on the evening news. You may even see the daily value posted on numerous websites, from the front page of Yahoo! to MSN, CNBC, CNN, or even local newspapers and their respective websites. Most places you see it, whether online or on tv, even make it easy to read by color-coding it, red means the average fell, green means it was up from the start of the trading day. But very few, and I would say this even applies to investment professionals, can even name the companies that make up the Dow.
Your John Q. Public probably doesn’t know much more than this: if the Dow goes up, the stock market went up. If the Dow went down, it was a down day and the stock market went down. But that is hardly the story.
If the Dow went down today does that mean the entire market went down? Of course not. Even when the overall market declines there are still some stocks that go up. Many of these we would say have an inverse relationship with the overall market, or are known as counter-cyclicals. Often this is expressed by having a negative Beta. But let’s back up for a minute.
I mentioned most people don’t know what makes up the Dow. If you use a broker to manage your investments try this next time they call to pitch you an investment idea (and if you use a broker you know just as well as I do that they like to call with the next biggest thing that you simply have to invest in!)… next time they call, ask them, “hey Ima Broker, I have been thinking about just putting some of my money in the stocks that make up the Dow and ride the average, which ones do you think I should consider?” Or you can flat out play dumb and ask them, “Ima Broker, what exactly makes up the Dow?” and if they give you a simple answer “Oh, 30 of the biggest stocks in the U.S.” you can pry farther and say, “oh yeah, which ones are those?” I bet you most professionals can’t name even half of the list. (And I’m not saying I can by the way!!!)
The reason for this blog isn’t to make your relationship with your broker comparable to your relationship with your ex-wife/ex-husband. In fact, most people don’t have a broker. They have an account with a company, say through their employer (like a 401(k) plan, 403(b) for you government or institutional folks, etc) or have an IRA at a bank or brokerage like Fidelity or Vanguard. Therefore, you call a toll free number and could speak to any one of hundreds of licensed professionals working in a call center, etc.
What I’m getting at is that it’s important to know this: when you hear that the Dow went up 40 points, you know what makes up the Dow and what implications that can have for your own investing.
So what makes up the Dow?! Well, I am not much for rote memorization so I had to look it up myself. 30 stocks, the biggest ones in the U.S. And the DJIA is weighted according to the size, so the bigger the company/stock, the more weight it carries in the average. Here is a link to the list of the 30 stocks that make up the Dow.
So how do they come up with the daily DJIA value and how much it gained or lost in value? As I mentioned in the previous paragraph, the DJIA is weighted accordingly for the bigger companies to have more pull, but that isn’t everything that makes up the number. Here is a more detailed explanation from Investopedia.com
Should you stress out about a sharp decline in the Dow or rejoice exceedingly in a huge gain by the index? Well, that depends… do you own a significant amount of the Dow components? If so, yeah. But even then does the Dow accurately track the entire stock market? Probably not. There are some days where the Dow can be pulled in one direction or another by a huge change in one its components, say if Procter & Gamble announce a huge acquisition like they did when they acquired Gillette. In the grand scheme of things remember this, it’s only an average composed of 30 companies. In contrast, the S&P 500 is a list of 500 companies. Now you will notice a lot of these averages move in the same direction as one another on any given day. Well, your 30 companies that make up the Dow are also in the S&P 500. And even when the stocks are not in both (or multiple) averages, the larger companies such as the 30 in the Dow, tend to trade in the same manner as the overall market due to their enormous size.
We’ll explore these industry averages more in the future, but hopefully you understand more about how the averages are valued and how they were derived. You may have noticed I used a website called Investopedia.com in my research. I have found this to be an excellent source for common investment questions, etc. As always I welcome your comments.