225: Dow Jones 30 Company Changes in 20 Years
Be Wealthy & Smart
Linda P. Jones
4.8 • 883 Ratings
🗓️ 6 February 2017
⏱️ 9 minutes
🧾️ Download transcript
Summary
Learn 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.
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.
For more savvy investing, to to www.lindapjones.com
Transcript
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| 0:00.0 | Be wealthy and smart, episode 225. |
| 0:03.0 | I'm gonna live no rich life. |
| 0:06.0 | Rich life. |
| 0:08.0 | I'm holding that's life. |
| 0:10.0 | If y'all know what I mean, put your hands up and declare with me |
| 0:13.8 | Yeah, I'm full of pay hey time I'm gonna live the good life |
| 0:20.8 | and you're gonna live the good life |
| 0:21.3 | and you're a glorious light Step into a world of wealth and financial freedom without budgets, boredom or bosses on be wealthy and |
| 0:30.3 | bosses on be wealthy Wealthy and Smart. And now here's your host, Linda P. Jones. |
| 0:37.0 | Welcome to Be Wealthy and Smart. I'm Linda P. Jones, America's Wealth Mentor. |
| 0:42.0 | Empowering Women and Men Worldwide to Financial Freedom. |
| 0:46.2 | On today's show, we're going to talk about the Dow Jones 30 companies and the changes that |
| 0:51.9 | they've made in the last 20 years. |
| 0:55.0 | You're going to learn why the Dow Jones Industrial Average is a pretty meaningless |
| 0:59.5 | indicator of growth, sorry to say, but true. Well this really started bugging me when it came up on the |
| 1:07.8 | Money Tree Investing podcast that the Dow wasn't really the best indicator to follow. I got into a bit of a debate with my colleague |
| 1:17.2 | Doug and we talked about whether the Dow was really a meaningful indicator. |
| 1:24.0 | And the more I started to think about it, the more I started to research. |
| 1:28.0 | And the more I started to research, the more I really became convinced that the Dow is more of a marketing tool than anything else. |
| 1:38.0 | And maybe you'll agree with me by the end of this podcast, but the Dow Jones Industrial Average started out a hundred years ago as a way to look at |
| 1:48.1 | 30 companies and compare their price movements over time. And by comparing those price movements over time. |
| 1:52.8 | And by comparing those price movements, the idea was that you'd be able to see the growth |
... |
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