FIN 320 week 2 discussion
Both the Dow Jones Industrial Average (DJIA) and the S&P 500 are stock indices that
follow several stocks and are headed by corporations. Both indices are frequently utilized as
indicators of overall market activity. Thirty publicly owned, big blue-chip firms that trade on the
NYSE and Nasdaq make up the DJIA index, which was first introduced in 1896. The DJIA is a
price-weighted index, meaning that the stock prices of each of the thirty businesses are put
together and then divided to determine the average. This increases the average level of impact for
businesses with higher prices. (Ganti, 2022) S&P 500 was established in 1957 and comprises 500
large size companies that are traded publicly. Kenton in 2022 The S&P 500 utilizes the
market-cap weighting approach, unlike the DJIA. A higher weighting is provided to the firm
with the larger market capitalization, which has a stronger impact on the index. Share price and
outstanding shares are multiplied to determine market capitalization. (Hayes, 2022) As for
myself, I believe the S&P 500 to be a more accurate indicator of portfolio objectives for income
and capital preservation. The S&P 500 utilizes a market-cap weighting approach and has a larger
number of firms. The index also undergoes more frequent modifications, which will aid in
achieving the revenue goal. 80% of all publicly listed firms in the United States are represented
by the index's 500 companies, making it possible to discover less risky investments to preserve
capital preservation. 2022 (McBride)
References
Ganti A. October 5, 2022. Dow Jones Industrial Average (DJIA): What It Is, It’s Companies.
Investopedia. https://www.investopedia.com/terms/d/djia.asp
Kenton W. February 15, 2022. S&P 500 Index: What It’s for and Why It’s Important in
Investing.
Investopedia. https://www.investopedia.com/terms/s/sp500.asp
Hayes A. January 21, 2022. Capitalization-weighted Index: Definition, Calculation, Example,
Investopedia. https://www.investopedia.com/terms
McBride G. October 10, 2022. The Dow vs. Nasdaq vs. S&P 500: What’s the difference?.
Bankrate. https://www.bankrate.com/investing
