{"id":6769,"date":"2022-01-20T14:21:00","date_gmt":"2022-01-20T11:21:00","guid":{"rendered":"https:\/\/www.robomarkets.com\/blog\/?p=6769"},"modified":"2024-02-20T15:45:53","modified_gmt":"2024-02-20T12:45:53","slug":"how-to-invest-in-dow-jones-industrial-average","status":"publish","type":"post","link":"https:\/\/www.robomarkets.com.cy\/blog\/investing\/how-to-invest-in-dow-jones-industrial-average\/","title":{"rendered":"How to Invest in Dow Jones Industrial Average (DJIA)?"},"content":{"rendered":"\n

The Dow Jones Industrial Average (DJIA)<\/a> is one of the oldest and most famous stock indices in the world. It is included in the top three US indices, boasting the best market capitalisation among them. In this overview, we will demonstrate what companies are in the Dow Jones Industrial Average<\/a> index today and describe some general investment options.<\/p>\n\n\n\n

<\/span>History of Dow Jones Industrial Average (DJIA)<\/span><\/h2>\n\n\n\n

The DJIA was created in 1896 by a journalist – the editor of the famous Wall Street Journal, Charles Henry Dow – alongside his business partner<\/a>, Edward Davis Jones. Charles Dow used the average for tracking the stock dynamics of the leading high-revenue companies in the US. When launched in 1896, the index consisted primarily of industrial companies producing and selling oil, gas, sugar, tobacco, cotton, etc.<\/p>\n\n\n\n

Particularly, the following companies were included in the DJIA at the start:<\/p>\n\n\n\n

    \n
  1. American Tobacco<\/li>\n\n\n\n
  2. American Sugar<\/li>\n\n\n\n
  3. American Cotton Oil<\/li>\n\n\n\n
  4. Chicago Gas<\/li>\n\n\n\n
  5. General Electric<\/a><\/li>\n\n\n\n
  6. Distilling and Cattle Feeding<\/li>\n\n\n\n
  7. Laclede Gas<\/li>\n\n\n\n
  8. National Lead<\/li>\n\n\n\n
  9. North American<\/li>\n\n\n\n
  10. Tennessee Coal, Iron, and Railroad<\/li>\n\n\n\n
  11. S. Rubber<\/li>\n\n\n\n
  12. S. Leather<\/li>\n<\/ol>\n\n\n\n

    The index has changed several times. In 1916, the list of companies was extended to 20, and in 1928 the list included 30 companies, which is the current total. During the Great Depression of the 1930s, the list underwent reshuffling because many companies had gone bankrupt. In 1932, 8 members of the index were replaced by large-cap companies such as Coca-Cola<\/a>, and The Procter & Gamble Company<\/a>.<\/p>\n\n\n\n

    There were also updates to the calculation formula of the index. When the DJIA was launched, it only indicated the arithmetic mean of the 12 stocks<\/a> it contained. Today, we use the Dow correction factor, which accounts for structural changes in the companies.<\/p>\n\n\n\n

    <\/span>What companies in the Dow Jones Industrial Average (DJIA) today<\/span><\/h2>\n\n\n\n

    For a company to be included in Industrial Average (DJIA), it must be a significant part of the US economic activity. Also, it must be registered in the NASDAQ or the NYSE, and be one of the largest industrial companies in the country.<\/p>\n\n\n\n

    The 30 companies of the index boast the highest capitalisation and ratings of reliability. Today, the DJIA (US30)<\/a> includes the following companies:<\/p>\n\n\n\n

      \n
    1. The Coca-Cola Company (KO)<\/strong><\/li>\n\n\n\n
    2. McDonald's Corporation<\/a> (MCD)<\/strong><\/li>\n\n\n\n
    3. The Walt Disney Company<\/a> (DIS)<\/strong><\/li>\n\n\n\n
    4. Merck & Co., Inc. (MRK)<\/strong><\/li>\n\n\n\n
    5. International Business Machines Corporation<\/a> (IBM)<\/strong><\/li>\n\n\n\n
    6. Johnson & Johnson<\/a> (JNJ)<\/strong><\/li>\n\n\n\n
    7. The Boeing Company<\/a> (BA)<\/strong><\/li>\n\n\n\n
    8. UnitedHealth Group Incorporated (UNH)<\/strong><\/li>\n\n\n\n
    9. The Home Depot, Inc. (HD)<\/strong><\/li>\n\n\n\n
    10. Intel Corporation<\/a> (INTC)<\/strong><\/li>\n\n\n\n
    11. Cisco Systems, Inc.<\/a> (CSCO)<\/strong><\/li>\n\n\n\n
    12. 3M Company<\/a> (MMM)<\/strong><\/li>\n\n\n\n
    13. Microsoft Corporation<\/a> (MSFT)<\/strong><\/li>\n\n\n\n
    14. The Procter & Gamble Company (PG)<\/strong><\/li>\n\n\n\n
    15. Dow Inc. (DOW)<\/strong><\/li>\n\n\n\n
    16. Verizon Communications Inc.<\/a> (VZ)<\/strong><\/li>\n\n\n\n
    17. NIKE, Inc.<\/a> (NKE)<\/strong><\/li>\n\n\n\n
    18. The Travelers Companies, Inc. (TRV)<\/strong><\/li>\n\n\n\n
    19. Walmart Inc.<\/a> (WMT)<\/strong><\/li>\n\n\n\n
    20. Honeywell International Inc. (HON)<\/strong><\/li>\n\n\n\n
    21. Visa Inc.<\/a> (V)<\/strong><\/li>\n\n\n\n
    22. JPMorgan Chase & Co.<\/a> (JPM)<\/strong><\/li>\n\n\n\n
    23. American Express Company (AXP)<\/strong><\/li>\n\n\n\n
    24. Caterpillar Inc.<\/a> (CAT)<\/strong><\/li>\n\n\n\n
    25. Chevron Corporation<\/a> (CVX)<\/strong><\/li>\n\n\n\n
    26. Salesforce.com, inc. (CRM)<\/strong><\/li>\n\n\n\n
    27. The Goldman Sachs Group, Inc.<\/a> (GS)<\/strong><\/li>\n\n\n\n
    28. Amgen Inc. (AMGN)<\/strong><\/li>\n\n\n\n
    29. Apple Inc.<\/a> (AAPL)<\/strong><\/li>\n\n\n\n
    30. Walgreens Boots Alliance, Inc. (WBA)<\/strong><\/li>\n<\/ol>\n\n\n\n

      The risk associated with an investment in these companies is rather small because they are very reliable. Nonetheless, their stock prices<\/a> can fluctuate significantly when volatility in financial markets is on the increase. Hence, the investment instruments used for trading<\/a> Dow Jones Industrial Average (DJIA) can entail either significant short-term<\/a> losses or profits.<\/p>\n\n\n\n

      For the DJIA, a weighted price calculation with the Dow correction factor is used. This method gives more weight to stocks with higher prices. As such, any changes in the stock prices of companies with a high share price will influence the whole index significantly. The list of the companies is revised from time to time.<\/p>\n\n\n\n

      \n\n
      \n\n
      \n

      Want to trade stocks without commission?<\/p>\n

      Gain access to over 1000 US stocks for commission-free trading on the R StocksTrader<\/span> platform<\/p>\n <\/div>\n

      \n \"partner-programme\"\n <\/div>\n Start Now<\/a>\n <\/div>\n
      \n\n \"partner-programme\"\n <\/div>\n <\/div>\n\n\n\n

      <\/span>Ways to invest in Dow Jones Industrial Average<\/span><\/h2>\n\n\n\n

      The DJIA is a high-liquidity asset for trading and investing. For investing, you can use various financial instruments depending on your strategy: stocks, options, futures, CFDs, ETFs.<\/p>\n\n\n\n

      <\/span>Buying stocks from the DJIA index<\/span><\/h3>\n\n\n\n

      As an investor, if you decide to collect a portfolio of Dow Jones Industrial Average (DJIA) stocks on your own, you will need to buy at least one stock of each company from the index. This will be costly due to the high price of certain stocks from the index. Moreover, you will have to constantly watch the market, re-balancing your investment portfolio. The advantage with this investing option is that you will also have your dividends<\/a> paid out to you.<\/p>\n\n\n\n

      \"Dow<\/a>
      Dow Jones Industrial Average (DJIA) index and Apple stock charts*<\/figcaption><\/figure>\n\n\n\n

      <\/span>Futures and options for DJIA<\/span><\/h3>\n\n\n\n

      Futures and options are standardised stock derivatives for the DJIA. Buying them can be interpreted as a trade with a whole portfolio of stocks from the index. Note that you would only receive contracts for your stocks – not the actual stock.<\/p>\n\n\n\n

      Derivatives allow experienced investors to use complex strategies with different combinations of futures and options. As a rule, these instruments are used for rather short-term investing – six to twelve months. Long-term investing<\/a> require changing contracts that are expiring for new ones, which might deteriorate your overall result.<\/p>\n\n\n\n

      \"DJIA<\/a>
      DJIA futures*<\/figcaption><\/figure>\n\n\n\n

      <\/span>DJIA ETFs<\/span><\/h3>\n\n\n\n

      ETFs stands for Exchange Traded Funds, which means trusts that have their stocks traded in an exchange. You can trade ETFs in the same way you trade normal stocks. When buying an ETF for Dow Jones Industrial Average index, you buy a mini portfolio of stocks included in the index. There are several ETFs for investing in DJIA. The SPDR Dow Jones Industrial Average ETF (DIA)<\/strong> is a prominent example.<\/p>\n\n\n\n

      The DIA is a solid and accessible investment instrument. Its performance in December 2020 was as follows:<\/p>\n\n\n\n