In the past, I have often suggested reviewing your Investment Portfolio from time-to-time. Also, don’t buy the stock of today’s “household names” and forget about them. Times change, today’s brand names can be replaced and new “mousetraps” are invented all the time. Well, this week, the Dow Jones Industrial Average has changed significantly.
The DOW is the oldest and longest-running stock index in America. It was first devised, by Charles Dow, in 1896. General Electric (started by Thomas A. Edison, but under a different name then) has had the longest tenure in the Index; however, even it missed a few years...way back when. As the linked article, from The New Yorker suggests, it reveals more than just changes in the Stock Market: it reveals something about us. The link is: http://www.newyorker.com/online/blogs/currency/2013/09/what-the-dow-tells-us-about-ourselves.html?mbid=nl_Daily%20(17).
The DOW composition has perhaps been effected most by: two World Wars; the Great Depression; Federal Legislation (i.e. Federal Highway Acts); changes in Technology (automobile and personal computer) and let’s not forget about Demographics (the Baby Boomers). The linked article describes what was happening in America during short snippets of time. (Just click on the short time-frames, below the chart.)
Just this week, the DOW has dropped Alcoa, Hewlett-Packard and Bank of America, and replaced them with Goldman Sachs, Nike and VISA. The 30 corporations in the DOW are not necessarily the largest in America; but, rather, they are generally the largest in their respective industries and, also, the Index is meant to be a diversified grouping if it is indeed expected to be indicative of the overall Stock Market.
NOTE: People in the Financial Services Industry prefer to watch the S & P Index of 500 stocks, since the larger index is generally more representative of the Overall Market. Most Non-Professional Investors, however, follow the more widely-known DOW 30. Oddly enough, both the DOW and the S & P move quite similarly, over time.