Dow Jones History
Before I go over the Dow Jones history, its important to know what the Dow Jones is. The Dow Jones is a stock market index. Currently it is calculated from the stock prices of 30 large US companies. It is actually a complex equation because of repeated stock splits. It is not the sum of the prices of each of those 30 companies. What is the history of the Dow Jones? The Dow Jones history goes way back into the 1800's. The Dow Jones Industrial Average was founded on May 26, 1896. At the time it only represented 12 stocks. Of those original 12 only one, General Electric, is still around. By 1928 the number of stocks increased to 20. By 1928 the number of stocks hit 30. During the Great Depression the Dow was reduced to 90% of its 1929 peak on July 8, 1932. Not coincidentally, the largest one-day percentage gain of 15% happened soon after the 90% big drop on March 15, 1933. However, the 1930s was a terrible decade as the Dow Jones industrial average was cut in half from the beginning to the end of the decade. As can be expected after great declines in the Dow Jones history, soon came the great increases in the 1940s and 1950s. The Dow went from about 40 in 1932 to 616 in the 1950s. The Dow continued to increase into the 1960s and ended the 1960s at about 800. The enthusiasm took the Dow in the early 1970s above the 1000 mark. Thats a growth of about 25 times your money over 40 years or 8.4% compounded annual growth rate. That doesn't include dividends - which were about 4-5%. But the cycle continued with the stagnant market of the 1970s. There was a big crash in 1973 and 1974 where the Dow lost about half its value. For the whole decade the Dow only rose from 800 to 838. The 80s saw large gains in the Dow -- despite Black Monday on October 19, 1987, where the Dow fell 22.61% in one day. The overall increase from the beginning to end of the 90's was 838 to 2,753. The 90s were even better for the Dow as it reached the 11,000s -- more than tripling the Dow for the decade. But, as we all know, that just set the Dow up for large losses. By the end of the week after the September 11 attacks the Dow had fallen 14%. The Dow eventually bottomed out in 2002 at about 7200 -- its lowest since 1997. By 2006 the Dow was roaring again above 11,000 and by 2007 it was above 14,000. But, the Dow Jones dropped to 6500 in 2009 -- its lowest since 1997. What does the Dow Jones history teach us? There will be ups and downs that will last for years. Do not panic when there is a protracted downfall. It will rise again even if it takes 10 to 15 years. As long as you put your money into the stock market for the long run you will be okay. Do not get too excited when the Dow rises significantly. If you buy more than what you planned when the stock market peaks, you will regret it. Regardless of what the Dow is doing continue on your investing plan. Do not increase or decrease your holdings or investment rate based upon the recent movements of the market. Don't think you can predict what the market will do based upon current world conditions or history. No one knows what the market will do in the short-term and anyone who tells you they do is either lying or ignorant. If the best investor in the world, Warren Buffett, doesn't think he or anyone can predict the short-term stock market movements, then what are the chances you can too? Don't try to time the market because you will lose more often than not. It's exciting to think that you might actually pick what will happen. And you might even be right from time to time. But, if you're investing for you and your family's future, then the boring investing decisions will be the right ones. return from dow jones history to stock market for beginners return to beginner investing made easy home
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