Rich Crocco

Yes, Apple is Going in the Dow; But Do You Remember How the Dow is Calculated?

Image via http://new.dowjones.com/products/dj-news/
Image via http://new.dowjones.com/products/dj-news/

It will be big news when Apple, Inc. is embraced by the Dow Jones Industrial Average on March 19th. Some might be surprised to find such a significant company was not already included in the statistic. Upon hearing the news I tried to remember exactly what companies are in the Dow, how it is calculated and what the history is. I’ve been over this plenty of times in school however it’s not something you think about everyday. I thought I might not be the only one in need of a refresher so I will look into these questions here.

What It Is
The Dow Jones Industrial Average is a statistic based on the stock prices of 30 of the largest US companies. The companies included are purposefully selected in order to cover the most significant and highly trades companies in all major industries of the US economy except Transportation & Utilities, as those industries have their own Averages. The Dow is one of many averages or indices available today. Some others include the S&P 500 & The Russell 2000, along with many foreign averages such as the Nikkei 225 in Japan.

There is no mathematical formal that determines which companies are included in the Dow, instead “a stock typically is added to The Dow only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors.” Read more…