O'Connor: Comparing the performance of your stocks
Stock indexes measure price fluctuations among stocks. By following the appropriate stock market index, you can compare the performance of your stocks to similar types of stocks within a particular index.
The Dow Jones Industrial Average. The Dow Jones Industrial Average (DJIA) is the figure most often referred to on the news when the market's daily activity is recapped. The DJIA is a price-weighted index of 30 major companies, including McDonald's, Wal-Mart and General Electric. As a result, high-priced stocks have much more of an influence on the index than low-priced stocks.
While changes have been made to the composition of the index over the last few years to more accurately represent the United States' service-based economy, the index is still heavily weighted toward energy stocks and stocks in cyclical industries, which often mirror the pace of economic growth and the demand for commodities. Also, the index is underweighted relative to other popular averages in financial stocks and heavily underweighted in technology stocks. The Dow Jones Industrial Average is a trademark of Dow Jones & Company.
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