Speaker 1: Get smarter in sixty seconds with brain Stuff from how
Speaker 1: stuffworks dot com. Hi Marshall Brain. If you watch the news,
Speaker 1: you hear all the time about the Dow Jones Industrial
Speaker 1: Average and other averages like the SMP five hundred and
Speaker 1: the Russell two thousand. These are market averages or indexes
Speaker 1: designed to tell you how companies traded on the stock
Speaker 1: market are doing. In general. The down Jones Industrial Average
Speaker 1: is simply the average value of thirty large industrial stocks.
Speaker 1: Big companies like General Motors, Goodyear, IBM, and x in
Speaker 1: are the kinds of companies that make up this index.
Speaker 1: The thing to understand is that the Dow Jones Industrial
Speaker 1: Average is nothing magic. Someone has chosen thirty companies and
Speaker 1: average their values together by following a specific formula. That's
Speaker 1: all it is. There are all sorts of other averages
Speaker 1: out there. The SMP five hundred is the average value
Speaker 1: of five hundred large companies, the Russell two thousand tracks
Speaker 1: the average two thousand smaller companies, and there are many,
Speaker 1: many others. What these averages tell you is the general
Speaker 1: health of stock prices as a whole. If the economy
Speaker 1: is doing well, then the prices of stocks as a
Speaker 1: group tend to rise if it's doing poorly, prices as
Speaker 1: a group tend to fall. The averages show you these
Speaker 1: tendencies in the market as a whole. If a specific
Speaker 1: stock is going down while the market as a whole
Speaker 1: is going up, that tells you something. Or if a
Speaker 1: stock is rising but is rising faster or slower than
Speaker 1: the market as a whole, that tells you something as well.
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