| Volume XIX | Issue 4 | November 2009 |
page 1 of 8 HOW NOW DOW: The Dow Jones Industrial Average poked its nose above 10000 on Oct. 14, retreated, hit 10000 again and then retreated again. As we went to press it was in the 10000 neighborhood. This is typical behavior for “The Dow” the world‘s most popular stock price measurement. Landmark numbers don’t mean too much. The important fact is that over time investors have a good chance of making money in stocks. In most stocks, price declines are offset to some degree by dividend income and that’s why we like dividend-paying stocks. But even people without a nickel in the stock market often ask. “What did the Dow do today?” It’s a quick and popular update of the economy and the effect it might have on personal assets. The Dow, an average that’s continuously recalculated throughout the trading day, shows how 30 large blue-chipS performed during a session as a means of depicting the overall movement of the stock market. It’s not a perfect system. Some of the blue-chips could fall on a good market day. The 30 stocks in the Dow, nine of which are in our Portfolio Ideas, are Alcoa (AA), American Express (AXP), AT&T (T), Bank of America (BAC), Boeing (BA), Caterpillar (CAT), Chevron (CVX), Cisco Systems (CSCO), Coca Cola (KO), DuPont (DD), ExxonMobil (XOM), General Electric (GE), Hewlett-Packard (HPQ), Home Depot (HD), Intel (INTC), Johnson & Johnson (JNJ), JPMorgan Chase (JPM), Kraft Foods (KFT), McDonald’s (MCD), Merck (MRK), Microsoft (MSFT), Pfizer (PFE), Procter & Gamble (PG), 3M (MMM), Travelers (TRV), United Technologies (UTX), Verizon Communications (VZ), Wal-Mart (WMT), and Walt Disney (DIS). It’s a good place to start stock research. Over the years, the Dow has lost its old “industrial” shtick as the U.S economy has moved from its pure industrial base to a more diverse manufacturing-services base. The only original Dow stock still in the fold after 113 years is General Electric. Sometimes, the Dow is mistakenly called an “index”, but it’s a mathematical price-weighted average that is subject to a divisor compensated by stock splits and other adjustments, such as the periodic addition and elimination of certain stocks. An index is a measure that compares the current value of a basket of stocks to an index number established years earlier. The most popular index is the Standard & Poor‘s 500 Stock Index. |
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