How does the Dow Jones Industrial Average work?
A. Commonly referred to simply as the Dow, the Dow Jones Industrial Average includes 30 stocks that are averaged to reflect what’s happening with the broader market. Most are traded on the New York Stock Exchange. When first chosen, the Dow components were primarily industrial. They are now more diversified. For example, General Electric Co. operates a financial services division and owns NBC Universal. Experts calculate the DJIA by taking into account stock splits, dividends and other factors in addition to reflecting daily changes in stock prices. Critics question how well the Dow represents the rest of the market because it includes only 30 stocks. You’ve probably heard of at least two other indexes: the Standard & Poor’s 500 index and the Nasdaq Composite Index. Like the Dow, these indexes measure a portion of the market. But these indexes reflect the ups and downs of many more companies. The S&P 500 includes 500 stocks selected by the S&P Index Committee, a team of analysts and ec
