Investing Crash Course: Week 1

• Save

I don’t know about any of you but the concept of investing in stocks (or anything) seemed like it should be reserved for a “certain” kind of person. You know the kind, the Monopoly-mustachioed “rich guy” that exists in the section of most people’s brains earmarked for stereotypes and gross generalizations. The stupid thing about relying on this kind of idea is the fact that’s it’s only an idea. And it’s a really dumb idea, too.

While investing in the stock market might seem like an impenetrable maze of obscure acronyms, nonsensical symbols, and meaningless numbers – it’s actually a lot more accessible than most people think. You don’t need to be a financial wizard or a millionaire to get started with the stock market but a basic understanding definitely helps a lot.

Want to know the fun/scary part? I am learning as I write these posts.  One of my goals for this year is learn and write about investing. I want to create a discussion. I want questions, comments, thoughts and observations. The more ways we can interact with each other, the more we can learn, grow, and emerge from our cocoon as the be-yoo-tiful investment butterflies we were meant to be.

A word of caution while reading my series – I am learning. Everything I publish will be researched and footnoted but you’re going to need to do your own homework.  The information I provide will be based on my own understanding of investing and may not always be a full and complete picture of the topic. Basically, use your head and make informed choices.  That is all.

First Lesson: What’s the Dow Jones?

The Dow Jones Industrial Average, or the ‘Dow’ as it’s more commonly known, is a price-weighted “average” of the thirty most significant U.S.  companies being traded on the stock market. Typically, those included are large, well-established companies that maintain a consistent reputation for profitability through good and bad economic conditions.

The index was first calculated by Charles Dow in 1896 and remains one of the most closely watched indices available today.  For example, you happen to be within hearing range of a couple of douche bags drinking wine,  playing on their Iphones, and pretentiously discussing the “market’s abysmal performance today”. If they’re talking “market” like  that, they’re probably talking about the Dow Jones.

As I understand it, the Dow is similar to someone calculating the batting average for the top thirty players in Major League Baseball and figuring out how their performance will influence which teams will get into the playoffs.

Investopedia has a good video that explains the Dow. It even has sheep.

• Save

Here’s a list of the companies currently being followed by the Dow:

As you can tell, most of these companies have been around awhile and are trusted household names.  General Electric, maker of all things from home appliances to health care innovations, is the longest standing member with its first inclusion in the original 1896 Dow Jones index calculation.

These mega-corporations are responsible for a large percentage of market trading (New York Stock Exchange, NASDAQ, etc.) and have the capacity to significantly impact the economy. This is one of the reasons the Dow Jones remains one of the most influential indices (indexes?) out there. More on this later.

And this concludes the first lesson in your Investment Crash Course. Until next time.

• Save

References

S & P Dow Jones Indices – Dow Jones Averages Overview Retrieved Dec 27, 2013.

Investopedia – Dow Jones Industrial Average  Retrieved Dec 27, 2013.

Wikipedia – Dow Jones Industrial Average Retrieved Dec 27, 2013.

Wikipedia – Blue Chip (Stock Market) Retrieved Dec 27, 2013.