WEBVTT - How the Dow Jones Industrial Average Works

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<v Speaker 1>Get smarter in sixty seconds with brain Stuff from how

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<v Speaker 1>stuffworks dot com. Hi Marshall Brain. If you watch the news,

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<v Speaker 1>you hear all the time about the Dow Jones Industrial

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<v Speaker 1>Average and other averages like the SMP five hundred and

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<v Speaker 1>the Russell two thousand. These are market averages or indexes

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<v Speaker 1>designed to tell you how companies traded on the stock

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<v Speaker 1>market are doing. In general. The down Jones Industrial Average

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<v Speaker 1>is simply the average value of thirty large industrial stocks.

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<v Speaker 1>Big companies like General Motors, Goodyear, IBM, and x in

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<v Speaker 1>are the kinds of companies that make up this index.

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<v Speaker 1>The thing to understand is that the Dow Jones Industrial

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<v Speaker 1>Average is nothing magic. Someone has chosen thirty companies and

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<v Speaker 1>average their values together by following a specific formula. That's

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<v Speaker 1>all it is. There are all sorts of other averages

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<v Speaker 1>out there. The SMP five hundred is the average value

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<v Speaker 1>of five hundred large companies, the Russell two thousand tracks

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<v Speaker 1>the average two thousand smaller companies, and there are many,

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<v Speaker 1>many others. What these averages tell you is the general

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<v Speaker 1>health of stock prices as a whole. If the economy

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<v Speaker 1>is doing well, then the prices of stocks as a

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<v Speaker 1>group tend to rise if it's doing poorly, prices as

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<v Speaker 1>a group tend to fall. The averages show you these

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<v Speaker 1>tendencies in the market as a whole. If a specific

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<v Speaker 1>stock is going down while the market as a whole

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<v Speaker 1>is going up, that tells you something. Or if a

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<v Speaker 1>stock is rising but is rising faster or slower than

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<v Speaker 1>the market as a whole, that tells you something as well.

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<v Speaker 1>Do you have any ideas or suggestions for this podcast?

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