A Little History On How The Stock Market Started

One day in 1884, Charles Henry Dow averaged the closing prices of 11 stocks he considered representative of the U.S

. economy in a paper that preceded The Wall Street Journal.

By 1896, The Wall Street Journal was publishing its average on a regular basis, and the most famous indicator of stock market health was born: the Dow Jones Industrial Average. Most people have heard of the Dow, as well as a few other well-known stock indexes that track the overall direction of the market. Indexes and averages serve as useful benchmarks against which investors can measure the performance of their own portfolios. Depending on its makeup, a stock index can give investors some idea about the state of the market as a whole or a certain sector of the market. Conceptually, a shift in the price of an index represents an equitable change in the stocks included in the index.

Basically, indexes are imaginary portfolios of securities that represent a particular market or section of the market. Each index has its own method of calculating a change in its base value, often expressed as a percentage change. Thus, you might hear that an index has risen or fallen by a certain percentage. Although you can't invest directly in an unmanaged index, you can invest in an index mutual fund that attempts to mirror a particular index by investing in the securities that comprise the index. The performance of an unmanaged index is not indicative of the performance of any specific investment.

Employer-sponsored retirement plans are more valuable than ever. The money in them grows tax deferred until it is withdrawn at retirement. And contributions to a 401(k) plan actually reduce your taxable income. But figuring out how to manage the assets in your retirement plan can be confusing, particularly in times of financial uncertainty.

If you're participating in an employer-sponsored retirement plan, you probably have the option of shifting the money in your plan from one fund to another. You can reallocate your retirement savings to reflect the changes you see in the marketplace. Here are a few guidelines to help you make this important decision.

The Dow is an index of widely held "blue-chip" stocks that is used as an indicator of the performance of U.S. industrial stocks. Unlike most other major indexes, the stocks in the Dow are unweighted by market capitalization. The 30 stocks included in the Dow are all major factors in their industries. Many have become household names: American Express, Boeing, Coca-Cola, General Electric, Hewlett-Packard, IBM, Intel, Johnson & Johnson, McDonald's, Microsoft, Procter & Gamble, Walt Disney, and Wal-Mart.

If you're concerned, take a look at that company's rating. The four main insurance company rating agencies are A.M. Best, Moody's, Standard & Poor's, and Fitch Ratings. You can access these services online, or you should be able to find copies of these guides at your local library.

by: Arthur Jones..

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