By: Bill and Cindi Porter, AILERON INVESTMENT ADVISORS
Q: Is the Dow Jones Industrial Average (DJIA) a good tool for individual investors?
A: Probably not if you invest in individual stocks (versus mutual funds). Consider this: The top 3 Dow Jones performers in 2024 (as of Nov 21, 2024) were Walmart + 60.3%, Goldman Sachs, + 53.9%, and American Express + 53.1%.1 The 3 worst Dow Jones performers were Boeing – 44.04%, Nike – 31.92%, and Merck – 11.46%.2
The DJIA reflects the performance of 30 stocks of leading U.S. blue-chip companies. If you owned all 30 stocks your average annual return as of November 19, 2024, would have been 15%. If you owned only some of the 30 stocks your return could have been significantly better or worse.
The index has undergone several changes over the years. In 1916, the DJIA components were updated from 12 stocks to 20. It was increased to 30 stocks in 1928, which has remained constant since then. Yet none of the original 30 stocks are still part of the current 30 members of the Dow Jones index. The last original stock was General Electric which was removed in 2018.
In early November of 2024, Nvidia replaced Intel as part of the 30-member lineup. The composition of DJIA has changed 59 times since its inception. Other big-name companies that have been removed from the Dow Jones include AT&T, Sears, and General Motors.3
DJIA, the S&P 500, and NASDAQ are each an index comprised of many stocks in the various sectors of the overall economy. You can invest in the entire index of each and earn the average rate of return or loss. Conversely, you can invest in individual companies within each index with varying results (i.e., Walmart + 60.3%, Boeing – 44.04%, or DJIA +15%).
A conversation with your trusted investment advisor may be helpful in planning your investment strategy.
Send your investment questions to: [email protected].
1 https://www.fool.com/investing/2024/11/19/these-are-the-5-top-performing-stocks-in-the-dow-j/
2 https://www.fool.com/investing/2024/11/21/these-are-the-5-worst-performing-stocks-in-the-dow/
3 https://www.investopedia.com/articles/investing/113015/4-famous-companies-dropped-dow-jones. asp#:~:text=Key%20Takeaways,and%20General%20Motors%20(GM).
For more information about Aileron Investment Advisors visit www.investwithaia.com.
Investing involves risk, including the potential loss of principal. This is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.
Securities and advisory services are offered through Madison Avenue Securities, LLC (“MAS”), a registered investment adviser & member FINRA/SIPC. MAS and Aileron Investment Advisors are not affiliated companies. 12/3/2024
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