Right On The Money

David M. Patrick, LUTCF

Charles Henry Dow had a goal: to find a simple way to measure the stock market’s ups and downs. So, in 1884, Dow chose 11 companies, added their stock prices together, divided by 11, and published the results in his firm’s newsletter, “Customer’s Afternoon Letter.”
Twelve years later, Dow’s index became the basis for the Dow Jones Industrial Average(DJIA) – the benchmark for charting stock market gains and losses.
How it happened:
Charles Dow and Edward Jones were financial reporters with a New York news agency when they teamed up with financial backer Charles Bergstresser to start their own financial news service. But, when it came time to title the company, “Bergstresser” was too long to be part of the name. The firm became Dow Jones & Company, Inc.
Dow’s original index appeared two years later and contained mostly railroad stocks. By the time the DJIA debuted, the “Letter” had become a full-fledged newspaper. Bergstresser gave it its name: The Wall Street Journal.
In 1928, the DJIA reached its final tally of 30 companies, and the method used to make index calculations changed to account for stock splits.
Today, Journal editors revise the DJIA list periodically. While the 30 stocks represent only one percent of companies traded, they make up about one quarter of the value of all stocks listed on the New York Stock Exchange. This history was provided by the Financial Literacy Center – one of the many financial resources I utilize in the financial planning process – and is a fascinating look at the evolution of our stock markets and news wires.