What Distinguishes the S&P 500 Index from the Dow Jones Index?
Among the stock market indexes, the S&P 500 and Dow Jones are the best known ones from two different organizations, namely the Standard and Poor's and Dow Jones Industrial Average Index. The Dow Jones can be considered as the great-grandfather of stock market indexes, dating back to 1896. However, a much wider range of businesses are covered by the Standard and Poor's 500, and a more sophisticated methodology is used by it.
Maintenance
The Dow Jones Industrial Average is maintained by a committee that consists of Dow Jones & Company's head of index research, CME Group's (a financial company that owns 90% of Dow Jones Indexes) head, and Wall Street Journal's Managing Editor. On the other hand Standard & Poor's, a company well-known for rating services, comprises of index analysts and economists who are a part of the committee that maintains the Standard and Poor's 500.
Stocks
Merely 30 stocks are included in the Dow Jones index, selected among companies in the United States in various industries apart from transportation and utilities. Other considerations include a history of growth and interest among investors. On the other hand, stocks of 500 companies in the United States are included in the Standard and Poor's 500. At selection time, funds of at least $4 billion dollars in the market must be present with a company. Most of the companies that are listed on the New York Stock Exchange 0r NASDAQ qualify, with representation balanced among various industries. 75% of equities in the United States are also included in the Standard and Poor's 500.
Methodology
Stock price weighs the Dow Jones Industrial Average. The price of every component stock is added by the committee and the sum is divided by a number that reflects the number of total stocks. Initially, the divisor was just the total, but today, an adjustment for stock splits is included in it, for instance. On the other hand, the market capitalization of the included company weighs the Standard and Poor's 500. Market capitalization refers to the number obtained after multiplying the share price by the total number of shares that are publicly traded.
Results
The largest blue chip companies that are a part of older industry are included in the Dow, and that is why its title includes the word "industrial." Newer technology companies like Google are not added as actively. Instead, expensive stocks are the focus of the Dow since it is price weighted. On the other hand, the Standard and Poor's 500 is more affected by companies that have more total market capitalization. Since privately held shares do not count, it is not influenced by companies that possess large number of those shares. See page line of a reputable futures trading training company for more information.
Even though the Standard and Poor's 500 has been outperformed by the Dow in the past, it has obviously climbed to a record finish this year. However, that is not to say that the Dow Jones has lost its worth. Visit website of Christian Financial Radio Network (CFRN) to know more. The bottom line is that it ultimately comes down to the above differences and how they might influence the goals that an investor like a trader might have when investing in these either or both of these two different indexes.
Maintenance
The Dow Jones Industrial Average is maintained by a committee that consists of Dow Jones & Company's head of index research, CME Group's (a financial company that owns 90% of Dow Jones Indexes) head, and Wall Street Journal's Managing Editor. On the other hand Standard & Poor's, a company well-known for rating services, comprises of index analysts and economists who are a part of the committee that maintains the Standard and Poor's 500.
Stocks
Merely 30 stocks are included in the Dow Jones index, selected among companies in the United States in various industries apart from transportation and utilities. Other considerations include a history of growth and interest among investors. On the other hand, stocks of 500 companies in the United States are included in the Standard and Poor's 500. At selection time, funds of at least $4 billion dollars in the market must be present with a company. Most of the companies that are listed on the New York Stock Exchange 0r NASDAQ qualify, with representation balanced among various industries. 75% of equities in the United States are also included in the Standard and Poor's 500.
Methodology
Stock price weighs the Dow Jones Industrial Average. The price of every component stock is added by the committee and the sum is divided by a number that reflects the number of total stocks. Initially, the divisor was just the total, but today, an adjustment for stock splits is included in it, for instance. On the other hand, the market capitalization of the included company weighs the Standard and Poor's 500. Market capitalization refers to the number obtained after multiplying the share price by the total number of shares that are publicly traded.
Results
The largest blue chip companies that are a part of older industry are included in the Dow, and that is why its title includes the word "industrial." Newer technology companies like Google are not added as actively. Instead, expensive stocks are the focus of the Dow since it is price weighted. On the other hand, the Standard and Poor's 500 is more affected by companies that have more total market capitalization. Since privately held shares do not count, it is not influenced by companies that possess large number of those shares. See page line of a reputable futures trading training company for more information.
Even though the Standard and Poor's 500 has been outperformed by the Dow in the past, it has obviously climbed to a record finish this year. However, that is not to say that the Dow Jones has lost its worth. Visit website of Christian Financial Radio Network (CFRN) to know more. The bottom line is that it ultimately comes down to the above differences and how they might influence the goals that an investor like a trader might have when investing in these either or both of these two different indexes.
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