225: Dow Jones 30 Company Changes in 20 Years

Screen Shot 2017-02-06 at 11.51.00 AMBe Wealthy Podcast CoverLearn how much the Dow Jones Industrial Average has changed and why it is a poor indicator to gauge stock performance.

I decided to research changes in the DJIA.

How many companies from the last 20 years are the same and how many have changed?

I researched the companies in the DJIA from 1997 – 2017.

(By the way, in the last 18 years, the Dow doubled from 10,000 to 20,000.

That’s an average of a 4% return).

How many companies in the Dow are the same today? Are we comparing apples to apples?

For example, if I go to the grocery store and pick out 30 different cans of food – olives, soup, green beans, peaches, etc. and add up the prices for each can, then twenty years later I change 10 cans and compare the prices to the original group of 30 cans from 20 years ago to today’s group of 30 cans, what is that telling me?

All we know is 66% of the cans are the same.

That’s what the Dow Jones Industrial Average is like.

Only 66% are the same companies from 20 years ago.

The DJIA lost these 10 companies:

Sears
AT & T
Eastman Kodak
General Motors
Goodyear
Hewlett Packard
International Paper
Philip Morris
Union Carbide
Allied Signal

There’s only one original company still in the 100 year old Dow: General Electric

So don’t get caught up in rah rah! Dow 20,000!

It means nothing! OK, it means two thirds of the companies have probably increased in value. That’s all you can presume!

Use the S & P 500 as your indicator. It changes too, but covers 65% of all stocks in the stock market.

Professional money managers are paid based on the S & P, not the Dow.

Be savvy. Don’t be fooled by marketing ploys.

Financial freedom can be yours…

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