4 Facts Every Adult Should Know About the Dow
The DJIA (Dow Jones Industrial Average), better known as the Dow 30 or simply Dow, is an index that tracks 30 public, blue-chip companies that trade on the NASDAQ and NYSE (New York Stock Exchange). The index is named after Dow Jones, a 19th-century journalist who developed it together with his business associate Edward Jones and is arguably one of the most followed stock market indexes worldwide.
The Dow 30 is America’s second-oldest market index – the oldest being the Dow Jones Transportation Average – and was developed to act as a proxy or indicator of the broader U.S. economy’s health. Some of the most popular members of the Dow today include Microsoft Corporation, The Walt Disney Co., Apple Inc., Walmart and McDonald’s.
1.The Dow 30 Was Founded In 1896 With 12 Companies
Much like today, the performance of early 20th-century companies was tied to the broader economy’s overall growth rate. This correlation meant that the Dow’s performance was an accurate reflection of the overall economy’s health.
The Dow was originally created with 12 stocks that reflected the biggest industries in the late 19th century and has since been a reliable barometer of the U.S. stock market. The 12 original companies featured in the Dow include:
- General Electric
- Tennessee Coal Iron and R.R.
- American Cotton Oil
- Laclede Gas
- American Tobacco
- Chicago Gas
- United States Rubber
- National Lead
- Distilling and Cattle Feeding
- North American
- American Sugar
- U.S. Leather
Due to periodic revaluation to replace the stocks that eventually fall short of the listing criteria, only one company out of the initial 12 remains today. By 1928, the Dow had expanded to its current size of 30 member companies, with its composition changing 60 times since 1928 to date. Despite the introduction of other stock market indexes, many investors still regard the Dow as a reliable indicator of the stock market’s performance.
2.G.E. (General Electric) Is the Only Component of the Initial 12 Left on the Dow
Inducted in 1907, General Electric has been a component of the Dow for 114 years, making it the longest-running member company so far. However, G.E. has not always enjoyed a flawless run: the Dow dropped G.E. for U.S Rubber only two years after its maiden induction, only to reintroduce it in 1899 before dropping it again in 1901 in favor of U.S. Steel. G.E. managed to rejoin in 1907 after U.S. Steel acquired Tennessee Coal Iron and R.R., a component of the Dow at the time.
3.The Dow’s Longest-Running Company Is Not Its Oldest Component
Although General Electric has been a member of the Dow for over a century, the title of the oldest component belongs to DuPont (NYSE: D.D.). Founded by Eleuthere Irenee du Pont in 1802, the chemical manufacturer quickly joined the ranks of the largest American gunpowder suppliers and has since grown to become one of the world’s leading chemical companies.
4.Dow Companies Are 111 Years Old On Average
Compared to stocks in more recent indexes like the S&P 500, the Dow’s current companies are, on average, markedly older. Thanks mostly to economic booms due to technological advancements, the average age of S&P 500 stocks has dropped significantly from 75 years less than a decade ago to 15 years.