The Dow Jones Industrial Average

I'm a novice investor. Will some knowledgeable Fool please tell me what the Dow Jones Industrial Average is? I'd like to know how it's calculated, too. Thanks!

It's easy, mate! The Dow Jones Industrial Average is designed to be a measure of the performance of the overall market. Thirty tried and true stocks make up the average. The nature of these 30 companies is thought to be representative of the market as a whole. This has been contested in the past, and likely will be again in the future. In other words, the representativeness of the DJIA is not universally accepted.

It's calculated by summing the closing share price of each DJIA stock, then dividing this sum by a fudge factor to yield the daily average. This dow divisor adjusts for such things as stock splits, and allows the average to be meaningfully compared to all previous averages.

I see. OK, here's an easier one. What stocks currently make up the DJIA?

That's an easier one, all right, mate. The list is at the bottom of this page.

For much more on the DJIA stocks and nifty ways to invest in them, be sure to visit the Fool's School and take a look at the Foolish Four Portfolio.