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What is the Dow Jones Industrial Average and Should You Care?

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What is the Dow Jones Industrial Average and Should You Care?

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Once you’ve got a good handle on what the index is, what it measures and how it’s calculated, we will answer the question of whether or not the Dow is something you should care about as an individual investor. What is the Dow Jones Industrial Average The Dow Jones Industrial Average is a price-weighted index composed of 30 of the most widely traded large-cap stocks—which are supposed to represent the broader market as a whole. In theory, the movements of these 30 stocks should be representative of the overall market. Oftentimes, investors prefer to use indices when tracking the market to give them a narrower view of what is happening in the overall market. You have most likely also heard of some of the other major stock indexes like the S&P 500, the Russell 2000 and the Dow Jones Wilshire 5000 Composite Index. Each one of these indices provides unique information for investors. The Dow Jones Industrial Average was originally created by Charles Dow in 1896—making it the oldest stock

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(Part 1),” the Dow Jones is comprised of 30 large-cap stocks. A large-cap stock is a stock with a market-capitalization rate, or market cap, of more than $5 to $10 billion. As you can see from the table below, many of the stocks in the Dow have market caps well over $100 billion—with ExxonMobil Corp. having the largest market cap by far at $400.3 billion. Only one of the stocks in the Dow, General Motors Corp. has a market cap of less than $10 billion ($6.33 billion).

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