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I'm taking an investing and personal finance class in school. I was assigned to ask someone who knows about the stock market why big companies like Apple and Google aren't included the Dow Jones Industrial Average (DJIA) even though they're doing really well?

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Please let me know what I can do to improve this question. – DavinKF Sep 11 '12 at 0:35
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I think the question is fine. I don't know why you were downvoted, other than somebody doesn't like homework questions. But, you were up front about it so I'm OK with it. Perhaps, in your question you could tell us what you discovered already on the subject, and we could confirm/improve your understanding? – Chris W. Rea♦ Sep 11 '12 at 0:43
Would you call Apple or Google Industrial companies? The DJIA is for Industrials as there are other DJ indices for Utilities and Transportation companies is something else to consider here. – JB King Apr 27 at 19:37

3 Answers

up vote 12 down vote accepted

That is a pretty exclusive club and for the most part they are not interested in highly volatile companies like Apple and Google. Sure, IBM is part of the DJIA, but that is about as stalwart as you can get these days.

The typical profile for a DJIA stock would be one that pays fairly predictable dividends, has been around since money was invented, and are not going anywhere unless the apocalypse really happens this year. In summary, DJIA is the boring reliable company index.

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You make it sound like boring and reliable is a bad thing in investing. I find the opposite to be true. – user4127 Sep 11 '12 at 13:13
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Didn't mean to imply that. Microsoft is probably the hippest of the bunch. – JohnFx Sep 12 '12 at 3:11
up vote 8 down vote

Traditionally, the Dow Jones Industrial Average (DJIA) was only comprised of stocks that were traded on the New York Stock exchange. Neither Apple (AAPL) nor Google (GOOG) are traded on the New York Stock Exchange but instead are traded on NASDAQ. All NASDAQ tickers are four characters long and all NYSE tickers are only three or less characters long (e.g. IBM or T (AT&T)).

However in 1999, MSFT became the first NASDAQ stock to be included in the DJIA. Given that AAPL now has the largest market capitalization of any company in U.S. history, I think it is likely if they retain that position, that they would eventually be let into the DOW club too, perhaps, ironically, even supplanting Microsoft.

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I think there are shorter tickers as well. NYSE:F for example. – littleadv Sep 11 '12 at 0:47
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Counterexamples: MSFT and INTC. news.bbc.co.uk/2/hi/business/486752.stm ... and the DJIA has since added CSCO, too. Current DJIA components: ca.finance.yahoo.com/q/cp?s=%5EDJI .. (removed my downvote after your edit :-) – Chris W. Rea♦ Sep 11 '12 at 0:47
Thanks for the suggested improvement Chris! – WilliamKF Sep 11 '12 at 0:55
up vote 5 down vote

In addition to the answers provided above, the weight the Dow uses to determine the index is not the market capitalization of the company involved. That means that companies like Google and Apple with very high share prices and no particular inclination to split could adversely effect the Dow, turning it into essentially the "Apple and Google and then some other companies" Industrial Average.

The highest share price Dow company right now, IIRC, is IBM. Both Google and Apple would have three times the influence on the Index as IBM does now.

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