What is the Dow Jones?

The Dow Jones is always talked about in the news, on the tv, internet, and in the paper. We've heard about its strength, and we've heard about its crashes. Well, mostly its crashes. What is this huge subject in financial news, though? Is it a stock? Is it a fund? What do you do with it? I always wondered this, growing up with parents who watched the news religiously. I always heard the term, but it never meant anything to me.

So, how does it apply to us? The Dow Jones is a stock market index, meaning that it averages the stock values of 30 large, publicly owned companies based in the United States. It essentially gives us an idea of how our country's overall market is trading within a normal trading session by benchmarking itself. It is composed of companies such as 3M, Boeing, IBM, JPMorgan Chase, Walmart, and 25 others.

What do we do with it, then? Well, other than a benchmark that speculative traders and investors use to compare their holdings to, it also can influence how investors and traders act, magnifying volatility. You can also trade ETFs such as the ProShares Short Dow 30 (DOG), which responds twice as much and in the opposite direction as the Dow. Derivatives, such as options and futures are available to trade also.

So what is the value of the Dow Jones? It generally fluctuates around the 10,000 area, below meaning that the markets are bad and above meaning that they are in good shape. You can watch The History of Dow Jones to get a more in-depth description and history of its development.

-Danny Guttridge