What is the Dow Jones Industrial Average?

Many people scamper home at the end of a long, hard day of work and are eager to flick on the nightly news; breathless with anticipation: "How'd the markets do today?" You hear it on street corners, you see it in office restroom stalls; folks trading well known information, fiction, fact, hype, hyperbole; they share their wisdom on the ways of THE MARKETS! For the blue chip mutual fund holder or the broad based 401K owner, the Dow Jones Industrial Average is important. If you're trying to get a feel for the overall economic temperature than using "the Dow" as your metric is a pretty smart idea. However, because the stock markets are so huge and all encompassing these days, using the Dow for your reading on how your own individual investments are doing is a little naïve. Especially if the stocks you own are largely small cap, bio-pharma, sector specific, or some other, lesser known combination of Penny plays; what's included in the Dow Jones Industrial Average doesn't really apply.

But what is the Dow Jones Industrial Average? What does it mean? Special thanks to our old friends at Investorpedia.com as they have given us the answer. "The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ." Okay, so what is that, you ask? Well the Dow Jones is made up of 30 of the best of the best. "Blue chips," as they're known.