Investment Terms

Monetary policy refers to the actions of a central bank to influence a nation's money supply and economy. Monetary policy is used to influence the employment situation and to manage inflation.
Monetary policy can also be described as a policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply. It is often targeted at inflation or the interest rate to ensure price stability and general trust in the currency.
Unlike fiscal policy, which relies on taxation, government spending, and government borrowing, monetary policy aims to manipulate the money supply, i.e. 'printing' more money or decreasing the money supply by changing interest rates or removing excess reserves.
Further goals of a monetary policy are usually to contribute to the stability of gross domestic product, to achieve and maintain low unemployment, and to maintain predictable exchange rates with other currencies.
Monetary policy is referred to as being either expansionary or contractionary.
Expansionary policy occurs when a monetary authority uses its tools to stimulate the economy. An expansionary policy maintains short-term interest rates at a lower than usual rate or increases the total supply of money in the economy more rapidly than usual. It is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that less expensive credit will entice businesses into expanding.
Contractionary monetary policy maintains short-term interest rates higher than usual, slows the rate of growth in the money supply, or even shrinks it to slow short-term economic growth and lessen inflation. Contractionary monetary policy can lead to increased unemployment and depressed borrowing and spending by consumers and businesses, which can eventually result in an economic recession if implemented too vigorously.

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The Dow Jones Industrial Average

The Dow Jones Industrial Average is an index that tracks 30 large, publicly-owned blue chip companies trading on the New York Stock Exchange and the NASDAQ. The Dow Jones is named after Charles Dow, who created the index back in 1896, along with his business partner Edward Jones.

The Dow is one of the oldest, single most-watched indices in the world. To investors, the Dow Jones is defined as a collection of blue-chip companies with consistently stable earnings.

The Dow Jones Industrial Average is the second oldest U.S. market index after the Dow Jones Transportation Average, which contains 20 transport stocks such as railroad and trucking companies. The Dow Jones Industrial Average was designed to serve as a proxy for the broader U.S. economy.

The performance of industrial companies is typically tied to the growth rate in the economy. As a result, the relationship between the Dow's performance and that of the U.S. economy was cemented. Even today, to many investors, a strong Dow, means a strong economy while a weak-performing Dow means a slowing economy.

The key point about the DJIA is that it is not a weighted arithmetic average, nor does it represent its component companies' market capitalization as does the S&P 500. Rather, it reflects the sum of the price of one share of stock for all the components, divided by the divisor. Thus, a one-point move in any of the component stocks will move the index by an identical number of points.

The most recent large scale change to the Dow took place in 1997 when four of the index's components were replaced. Two years later, in 1999, four more components of the Dow were changed. The most recent change took place on June 26, 2018, when Walgreens Boots Alliance, Inc. replaced General Electric Company.

On March 15, 1933, the Dow experienced its largest one-day percentage gain which happened during the 1930s bear market, totaling 15.34 percent. The Dow gained 8.26 points and closed at 62.10.

While in March 2020, the Dow Jones crashes with back-to-back record down days amid the global coronavirus pandemic. It broke below 20,000 points and fell 3,000 points in a single day.

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A detailed breakdown of individual credit history, Credit Report

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Investment Term - Systematic Risk.

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