July 24, 2011

The First Dow Jones Average

The first Dow Jones Average has had several name changes over the years. Today it is known as the Dow Jones Transportation Average and is often referred to as the Dow Jones Transports. When it was first created by Charles Dow in 1884, It tracked the combined performance of eleven companies. Because the railroad industry was so large and prominent in the United States at this time, nine of the companies were in the railroad industry. This composition to the Stock Index would change over time as new industries such as the Automobile and Airline Industry groups, sprang up and become important parts of the U.S. Economy. Currently, the Dow Jones Transports contain only four railroad companies (a big change from when it was first introduced!). Other notable companies in the Index today, include Delta Airlines, FedEx Corporation, United Parcel Service (UPS), and Union Pacific Corp.

Investors follow this stock Index because it is considered to be the best overall measure of the transportation sector in the United States. Market Analyst and Economist have observed that when the economy is coming out of a recession, the performance of the Dow Jones Transports will usually outperform the other two Dow Averages, the Dow Jones Industrial Average and the Dow Jones Utility Average. As manufacturing and production increase, shipping, railroad, trucking, and airline companies begin to increase their profits resulting from moving more goods than were moved during recession time. Because of this important attribute, investors closely monitor the performance of the Dow Jones Transports especially during recession times - looking for clues to a growing economy and the signs that the end of a recession is near. To see the charts and stock quotes for each company in the Dow Transports, the Investing for Beginners website has a page titled, Remembering the Rails, the Formation of the First Dow Jones Average. There is also information for how to trade the actual index itself. This is done through a security called an Exchange Traded Fund. Live charts of the performance of the actual Dow Jones Average itself, is also included on the page.

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