Stock Market Explained Video Series

Here I provide you with my newest 3 video’s on investing. I cover specificially:

  • What Derivative’s & Swap’s Are
  • Why I Think Buy & Hold Investing is Dead
  • How Professional’s Invest in The Market

Puzzled About DerivativesIn the video’s I give a brief history on the Dow Jone’s Industrial Average. Since I never wrote about that in any article, I provide that information here.

The stock market is considered by most people to be the Dow Jones Industrial average. Everyone has been sticking their retirement funds into it for over a hundred years, in one way or another. So, I thought I’d talk a bit about it.

A Little History

I’ll skip over a lot of the history and instead focus on how it operates. The Dow was created in 1896, by Charles Dow. At that time it was made up from 12 stock’s, that where chosen to be on the list because, they best represented the performance of their specific industry. Of those 12 stock’s only one remains being General Electric.

On October 1, 1928, the Dow was expanded to a 30 stock portfolio. It still is made up of just 30 stocks today. Here they are:

  • 3M
  • Alcoa
  • American Express
  • AT&T
  • Bank of America
  • Boeing
  • Caterpillar
  • Chevron
  • Cisco
  • Coca Cola
  • DuPont
  • Exxon Mobil
  • General Electric
  • Hewlett Packard
  • Home Depot
  • Intel
  • IBM
  • Johnson & Johnson
  • J.P. Morgan Chase
  • Kraft
  • McDonalds
  • Merck
  • Microsoft
  • Pfizer
  • Procter & Gamble
  • Travelers
  • United Technologies Corporation
  • Verizon
  • Wal-Mart
  • Walt Disney

How is the Dow Calculated?

Originally the Dow was calculated by adding the price’s for all of the stocks and then divided by zero, but not any more. To keep the Dow a meaningful number more needs to be done with all of the stock substitutions, stock splits, spinoffs, etc.

A stock split is when a company that is currently selling at $50 per share, decides to double the number of shares, but have each be worth half as much. So this company would still be worth the same overall, but it’s per share price would be $25. This is why a company with a huge per share value may be worth less than one worth $10!

So in calculating the Dow, they have to figure out the exact value of all 30 stock’s if they purchased the exact same dollar amount of each share.

2 Responses to “Stock Market Explained Video Series”

  1. Joy says:

    Hey Derek!
    Good stuff out there.Learned new things.Can we have more on stocks and derivatives. 🙂

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